media release (18-341MR)

Court orders penalties and other relief against Westpac for BBSW conduct


The Federal Court of Australia today ordered Westpac Banking Corporation (Westpac) pay a pecuniary penalty of $3.3 million for contravening s12CC of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) through its involvement in setting BBSW in 2010.

In reasons for making the pecuniary penalty order, Justice Beach noted the legislative constraint he had in imposing the order,

'If I had been permitted to do so I would have imposed a penalty of at least one order of magnitude above $3.3 million in order to discharge [the objectives of specific and general deterrence]. But I am not free do so.'

Justice Beach concluded in his reasons,

'Westpac's misconduct was serious and unacceptable…Westpac has not shown the contrition of the other banks. Moreover, imposing the maximum penalty is the only step available to me to achieve specific and general deterrence. The message that should be sent is that if you manipulate or attempt to manipulate key benchmark rates you are likely to have the maximum penalty imposed, whatever that is from time to time.'

The Court also ordered that an independent expert agreed between ASIC and Westpac be appointed to review whether Westpac's current systems, policies and procedures are appropriate, and to report back to ASIC within 9 months.

It was also ordered that Westpac pay ASIC's costs of and incidental to the penalty hearing as agreed and assessed.

Today's court orders follow Justice Beach's judgment, delivered on 24 May 2018, which found that Westpac on 4 dates in 2010 traded with a dominant purpose of influencing yields of traded Prime Bank Bills and where BBSW set in a way that was favourable to its rate set exposure. His Honour held that this was unconscionable conduct in contravention of s12CC of the ASIC Act.

His Honour also found in his 24 May 2018 judgment that Westpac had inadequate procedures and training and contravened its financial services licensee obligations under s912A(1)(a), (c), (ca) and (f) of the Corporations Act 2001 (Cth).

ASIC Commissioner Cathie Armour welcomed today's decision and noted that 'ASIC brought this litigation to hold the major banks to account for their unacceptable conduct, and to test the scope of the law in combating benchmark manipulation. ASIC actions have led to these successful court outcomes, and also contributed to new benchmark manipulation offences being enacted by Parliament, and the calculation method and administration of the BBSW being radically overhauled.'

Read the full judgment


On 5 April 2016 ASIC commenced civil penalty proceedings in the Federal Court against Westpac, alleging in the period between 6 April 2010 and 6 June 2012 (inclusive) it traded in a manner that was unconscionable and created an artificial price and a false appearance with respect to the market for certain financial products that were priced or valued off BBSW.

This mirrored proceedings brought in the Federal Court against the Australia and New Zealand Banking Group (ANZ) on 4 March 2016 (refer: 16-060MR), against National Australia Bank (NAB) on 7 June 2016 (refer: 16-183MR) and Commonwealth Bank of Australia (CBA) on 30 January 2018 (refer:18-024MR).

On 10 November 2017, the Federal Court made declarations that each of ANZ and NAB had attempted to engage in unconscionable conduct in attempting to seek to change where the BBSW set on certain dates and that each bank failed to do all things necessary to ensure that they provided financial services honestly and fairly. The Federal Court imposed pecuniary penalties of $10 million on each bank.

On 20 November 2017, ASIC accepted enforceable undertakings from ANZ and NAB which provides for both banks to take certain steps and to pay $20 million to be applied to the benefit of the community, and that each will pay $20 million towards ASIC's investigation and other costs (refer: 17-393MR).

On 21 June 2018, the Federal Court in Melbourne imposed pecuniary penalties totalling $5 million on CBA for attempting to engage in unconscionable conduct in relation to BBSW. CBA admitted to attempting to seek to change where BBSW set on five occasions in the period 31 January 2012 to 15 June 2012.

On 11 July 2018 ASIC accepted a court enforceable undertaking to address its BBSW conduct which provides for CBA will pay $15 million to be applied to the benefit of the community and $5 million towards ASIC's investigation and legal costs (refer: 18-210MR).

In July 2015, ASIC published Report 440, which addresses the potential manipulation of financial benchmarks and related conduct issues.

The Government has recently introduced legislation to implement financial benchmark regulatory reform and ASIC has consulted on proposed financial benchmark rules.

On 21 May 2018, the new BBSW methodology commenced (refer: 18-144MR). The new BBSW methodology calculates the benchmark directly from market transactions during a longer rate-set window and involves a larger number of participants. This means that the benchmark is anchored to real transactions at traded prices.

Editor's note:

Westpac has complied with orders 3 to 6 of Court Orders dated 9 November 2018 with respect to the payment of a pecuniary penalty and appointment of an independent expert to review Westpac's systems, policies and procedures and report back to ASIC.

Media enquiries: Contact ASIC Media Unit