The latest compliance issues in wealth management across Asia-Pacific.

Westpac
A top Australian court has ordered Westpac to pay A$3.0 million ($2.6 million) for breaking rules by helping set short-term interest rates used in the country’s banking and finance sector.

The offence related to how Westpac acted in its setting of the Bank Bill Swap Rate, aka BBSW, in 2010. BBSW is similar to the LIBOR (London Interbank Overnight Rate) used to price derivatives and securities. The abuse of these rates has resulted in a number of banks around the world being fined by regulators, and has also prompted reforms to the inter-bank rates system.

The judge handling the Westpac case said that he would have imposed a far higher punishment on the bank, but rules prevented this.

“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 said in a statement reported by ASIC, the principal Australian regulator.

“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 judge said. 

The court also ordered that an independent expert, agreed between ASIC and Westpac, should be appointed to review whether Westpac's current systems, policies and procedures are appropriate, and to report back to ASIC within nine 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 on four dates in 2010 Westpac 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. The judge said that this was unconscionable conduct and broke the law.

Australia has been cracking down on banks and wealth managers for a variety of misselling and regulatory breaches. For a summary, see here.