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Westpac, ANZ Bank to Pay A$6 Million Over FX Trading Conduct

Updated on
  • Banks sanctioned by regulator over inappropriate conduct
  • Action follows industry-wide investigation by regulator

Two of Australia’s largest banks vowed to toughen oversight of their foreign-exchange practices and each pay A$3 million ($2.3 million) to the nation’s financial literacy fund after a regulator found inappropriate conduct in their currency trading divisions.

Westpac Banking Corp. and Australia & New Zealand Banking Group Ltd. said Wednesday they entered into so-called enforceable undertakings 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 as an alternative to civil action by the regulator.

The settlement means Australia’s four biggest banks have now been sanctioned as part of an industrywide investigation into oversight failings in their foreign exchange divisions. Commonwealth Bank of Australia and National Australia Bank Ltd. in December undertook similar undertakings and each contributed A$2.5 million to the financial literacy fund for similar breaches.

Separately, ANZ, Westpac and National Australia are defending accusations that some of their employees manipulated the country’s benchmark swap rate. Court hearings are slated for September.

Case Settlement

Wednesday’s agreements arose from an 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,” the regulator said in a statement on its website.

Inappropriate conduct highlighted by ASIC on Wednesday included:

  • On several occasions, Westpac and ANZ traders disclosed confidential details of pending client orders to external parties, including in some cases identifying them by code names
  • On at least one occasion, a Westpac employee disclosed to an external party confidential information about the orders that the bank planned to submit in relation to foreign-exchange rate settings
  • On at least one occasion, a former ANZ trader exchanged confidential information about other institutions’ customer flows and proprietary positions

ANZ Bank accepted that aspects of its supervision and monitoring of the spot foreign-exchange business at the time of the probe were “not good enough,” Chief Risk Officer Nigel Williams said in a statement.

Westpac continues to enhance its “policies and controls” for spot foreign exchange, said Lyn Cobley, chief executive of the lender’s institutional bank.

Shares of ANZ Bank lost 0.5 percent, while Westpac dropped 0.9 percent as of 1:41 p.m. Sydney time. The benchmark S&P/ASX 200 Index lost 0.4 percent.