The bank and Australian regulator have locked horns over claims of rate-rigging.

Australia and New Zealand Banking Group has rejected allegations by Australia’s financial watchdog that it manipulated markets, an offence that has already seen a number of banks around the world fined and punished.

The Australian Securities and Investments Commission claims ANZ is guilty of “unconscionable conduct and market manipulation in relation to the ANZ's involvement in setting the bank bill swap reference rate (BBSW) in the period March 2010 to May 2012”.

In a statement issued on Friday, ANZ said it will “vigorously defend legal action brought by ASIC”.

Since mid-2012 the regulator has been investigating the practices of 14 panel bank participants in the Australian interbank BBSW market covering the period 2007 to 2012.

“ASIC has advised ANZ that it has no concerns about the bank’s current market practices and ANZ notes there has been no allegation of collusion between it and other institutions,” ANZ said.

“We have cooperated fully with ASIC’s investigation over many months, at a cost of many millions of dollars. This includes actively seeking to resolve the Commission’s concerns since January 2015. We believe the Commission’s statement of claim is based on a misunderstanding of how bank bill issuance and interest rate risk management operates and the limited case law which applies to this area,” said Nigel Williams, chief risk officer at the bank.

“Our practices in the BBSW market were consistent with Australian market practices in wholesale financial markets and we reject ASIC’s characterisation of the transactions in question. Chat messages between traders is an issue that we will continue to review. We have already dealt with chats and behaviours that breach our code of conduct through internal disciplinary action against the individuals involved,” he continued.

“Since June 2014 we have also engaged ASIC about chat messages between ANZ traders. We do not agree however with ASIC’s characterisation of the issues related to the chat messages. It is now for the courts to provide clarity on trading practices,” he said.

ASIC initiated legal proceedings in the Federal Court in Melbourne.

The BBSW is the primary interest rate benchmark used in Australian financial markets, administered by the Australian Financial Markets Association. On 27 September 2013, AFMA changed the method by which the BBSW is calculated. The conduct that the proceedings relate to occurred before the change in methodology.