“Westpac denies the allegation in this claim and, if served with the claim, will defend those allegations vigorously”.
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Westpac also denies the allegations, although all three banks are being sued by the corporate regulator, the Australian Securities and Investment Commission (ASIC) for alleged market manipulation and unconscionable conduct.
Among the Australian and worldwide banks being sued are ANZ, NAB, Westpac, Macquarie, Deutsche Bank, HSBC, JP Morgan, and Citi.
A banking source described the hedge funds claims as opportunistic but said the emergence of the U.S. case would reduce any chance of a settlement of the ASIC actions because any such settlement could provide fuel for the USA class action.
A lawsuit, filed by two US investment funds and a trader, casts a wider net, claiming that more than a dozen banks and two brokerages intentionally and systematically manipulated the benchmark rate and rate-based derivatives prices to gain hundreds of millions of dollars or more in illegitimate profits.
As a result of their alleged wrong-doings, the banks now face the possibility of major fines and significant legal action.
The action emerged late yesterday in USA and local media reports, and statements from the big four banks here yesterday afternoon.
The new complaint was filed in a USA court by Florida-based derivative trader, Richard Dennis and hedge fund Sonterra Capital Master Fund and Frontpoint Financial Services.
National Australia Bank, Australia’s top lender, said in a statement it did not agree with the claims, while fourth-biggest ANZ Banking Group said it would vigorously defend the legal action.
Before late September 2013, the Australian benchmark was based on submissions from up to 14 local and overseas banks.
For banks, small differences in the rate that is set can equal many millions of dollars in profits or losses. Commonwealth Bank of Australia, the nation’s second largest lender, was not immediately available to comment.
The banks “manipulated BBSW so frequently that traders often joked about how easy it was to fix the rate”, the U.S. claim says.
The US claim refers to ASIC’s proceedings as “smoking gun evidence including emails, phone calls, and electronic chats, demonstrating a conspiracy among BBSW panel banks and interdealer brokers to fix the prices of BBSW-based derivatives”.
ASIC has not yet launched action against the Commonwealth Bank but is expected to do so in the near future.
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The other banks that are defendants in the action are Citibank, BNP Paribas, Credit Suisse, Deutsche Bank, HSBC, JPMorgan Chase, Lloyds, Morgan Stanley, Royal Bank of Canada, Royal Bank of Scotland and UBS.
