Australian Banks Sanctioned by Regulator Over FX Conductby
CBA and NAB to pay A$2.5 million to financial literacy fund
Banks will make changes to FX controls and supervision
Two of Australia’s largest banks vowed to toughen oversight of their foreign-exchange practices and each pay A$2.5 million ($1.8 million) to the nation’s financial literacy fund after a regulator found inappropriate conduct in their currency trading divisions.
Commonwealth Bank of Australia and National Australia Bank Ltd. said they entered into a so-called enforceable undertaking with the Australian Securities & Investments Commission to make changes to their foreign-exchange systems, controls and supervision. An enforceable undertaking is an Australian legal device that is sometimes used instead of civil action by the regulator.
The settlement represents the latest in a series of probes by Australian regulators into historical allegations of misconduct in banks’ trading divisions. Last month, Macquarie Bank Ltd. and Australia & New Zealand Banking Group Ltd. agreed to pay a combined A$15 million in fines concerning attempted cartel conduct in relation to conversations around the setting of a benchmark Malaysian interest rate in 2011.
Next September, the courts are slated to hear the most significant case to date, concerning allegations that some banks manipulated the country’s benchmark swap rate. The regulator has been investigating the matter since mid-2012 and ASIC’s Chief Executive Greg Medcraft told parliament earlier this year it had built up an A$80 million war chest for potential litigation.
The commission said Wednesday’s agreement arose from its investigation of incidents between January 2008 and June 2013 in which the banks “failed to ensure that their systems and controls were adequate to address risks relating to instances of inappropriate conduct identified by ASIC.”
Questionable conduct highlighted by the regulator included:
- On several occasions, an NAB employee on an offshore spot foreign-exchange desk, acting with an employee of another Australian bank, shared confidential information and entered offers into the trading platform without any apparent legitimate commercial reason for doing so.
- On two occasions, CBA employees on an offshore spot foreign-exchange desk acquired proprietary positions in a currency after finding out about large fix orders by the bank in that currency.
“We acknowledge that in some instances within our Spot FX business we could have better trained our people and had more appropriate systems and processes in place,” NAB’s Chief Risk Officer David Gall said in an e-mailed statement, adding that the Melbourne-based lender fully cooperated with the regulator.
CBA’s agreement included the “engagement of an independent expert, who will review and assess the changes we have made to our trading operating model in recent years, including in training, procedures and oversight,” the Sydney-based bank said in a statement on its website.