Royal Bank of Scotland is the latest bank to be penalised for its role in manipulating Australia’s bank bill swap rate after copping a $1.6 million ‘enforceable undertaking’ from the corporate watchdog.
The fine marks the latest admission by a major global bank that a culture of rate-rigging spread to Australia, contaminating the integrity of the floating rate that is used to set the price of trillions of dollars of mortgage and interest bearing securities.
RBS will make a voluntary contribution of $1.6 million to finance independent financial literacy projects in Australia as part of an enforceable undertaking, according to a release the Australian Securities and Investment Commission.
The fine follows similar $1 million payments made by Swiss bank UBS and French bank BNP Paribas for the same similar offences.
ASIC said that RBS had found evidence of rate rigging its BBSW submissions to benefit the bank’s derivatives positions.
The BBSW scandal followed widespread manipulation of the London Inter-bank Offer Rate which is used to set trillions of dollars of debt securities globally.
The BBSW rate has been set by a panel of banks that participate in the local market and was regarded as less likely to be manipulated because it was based on actual market prices whereas the Libor rate was based on estimated borrowing costs. However the recent penalties showed that rate-riggers had attempted to impact the local rate.
While international banks have faced $1 million dollar ‘enforceable undertakings for attempting to manipulate the local rate, the punishment pails in comparison to the multi-billion dollar fines dished out by international regulators.
By comparison RBS was fined EUR324 million in December 2013 after a European Commission investigation into attempted rigging of rates in Europe and Japan. The 81 per cent government owned bank was one of a number of banks which were fined a total of EUR1.71 billion.