ANZ told the public that only “a small number of traders” had tried to move a key interest rate. Court papers published in December 2018 say the bank’s chief executive knew far more than that.
ANZ had already paid a $50 million fine the year before, after admitting it tried to manipulate the BBSW on 10 occasions between 2010 and 2012. The rate was set daily by Australia’s biggest banks and fed into what consumers paid on mortgages, personal loans, credit cards and other debt. The bank had maintained that the small group of traders acted alone.
The documents, obtained by the ABC, tell a different story. Filed by the corporate regulator ASIC in the Federal Court in May 2017, they show ASIC held evidence that senior management knew about the strategy and took part in it. For the first time, chief executive Shayne Elliott was implicated, along with former chief executive Mike Smith and former chief financial officer Peter Marriott.
What the filings say
ASIC alleged that an internal report sent to risk managers estimated ANZ would need to put an extra $2 billion into the market on certain days to stand a chance of moving the rate. In November 2010, a presentation emailed to Elliott said the bank was losing around $15-30 million a year because it could not “manage its daily exposure to BBSW.”
The talks reached back further. A March group email among Smith, Elliott and two others covered a plan to shift more money to Elliott’s Institutional division, part of a reorganisation giving the trading floor more power. ASIC alleged the money was partly meant to sharpen ANZ’s ability to influence the BBSW. Elliott wrote that he had been told the funds could be a “significant benefit to the group,” adding that “Mike [Smith] is open to the idea.”
By August, traders were complaining loudly about their BBSW losses in court-filed phone calls. On August 17, trader Rob O’Callaghan said on a phone call that the desk would ask for “as much discretion as we need.” An email to senior management, Elliott included, the same day listed one reason for freeing up funds: it would let ANZ “further optimise/leverage rate sets,” worth an estimated $14 million.
In October, Andrew Allen, the bank’s New Zealand global markets manager, warned that the plan would put short-term funding and liquidity “in the hands of [a] trader who [may] then manage this in an imprudent way to maximise revenues.” The email was forwarded to Elliott. The restructure went ahead regardless.
A November PowerPoint sent to senior managers said the new structure would help ANZ “catch up to our competitors.” A draft section observed that Westpac “has the most powerful influence on the BBSW.” A later version cited a 2009 episode in which Westpac pushed the rate down 19 basis points one day and up 20 the next, at a cost to ANZ of $AU2.9 million. Whether Elliott saw that later version is unclear.
Why the evidence surfaced late
In March 2016, ASIC gave the court a widely reported list of ANZ managers it believed were involved in or knew about the rate-setting. Elliott, Smith and Marriott were not on it. ASIC told the ABC that some documents were still being reviewed, and that others were thought at the time to be under a privilege claim, “although that turned out not to be the case.” ANZ said the omission was ASIC’s business and that it had no part in preparing the court documents.
Westpac was the only one of the big four to fight the regulator in court. It was found to have engaged in unconscionable conduct and to have traded with the aim of influencing the rate. CBA, NAB and ANZ all settled.
