Commonwealth Bank traders stand accused of long-standing market manipulation dating back 17 years.
- ASIC has filed hundreds of CBA emails and conversation records in support of its rate-rigging court case
- The regulator alleges CBA has engaged in market manipulation since 2001
- CBA and Westpac are the only major Australian major banks still defending their cases
The corporate regulator filed hundreds of CBA email and conversation records in support of its case on Wednesday, some of which contained instances of traders speaking crudely.
At times, traders spoke about "farking" [sic], "butchering" and "smashing" the bank bill swap rate (BBSW) — which was a key Australian interest rate benchmark.
In a group email, David Sietsma, who worked in CBA's asset and liability management (ALM) unit, channelled Jack Nicholson while appearing to defend the practice of rate-rigging.
"You can't handle the truth!" he wrote, parodying the famous cross-examination scene with Nicholson and Tom Cruise from A Few Good Men.
"You weep for 6 month BBSW and you curse the banks that manipulate the rate set.
"You have the luxury of not knowing what I know: that the BBSW rate set, while tragic, is the best thing we've got.
"And ALM's existence, while grotesque and incomprehensible to you, protects profits…
ASIC's case is focused on six instances of alleged unconscionable conduct and market manipulation which occurred in 2012.
The corporate watchdog alleged the lengthy conversation records showed CBA staff knew the BBSW was easy to manipulate and the bank took advantage of this.
"We do not believe our employees have engaged in unlawful conduct, nor have they done anything that would have adversely impacted the efficiency and integrity of financial markets as alleged, or at all," a CBA spokesperson told the ABC.
'Pure market manipulation'
The records also included communications with traders embroiled in allegations of manipulation at other banks, as evidence CBA was aware of the practices of other institutions.
They include Westpac trader Colin "the Rat" Roden, who fronted court in ASIC's rate-rigging case against Westpac.
In one expletive-laden exchange in 2010, CBA portfolio manager Garfield Lee joked with HSBC's Carl Radford about rate-rigging:
"ANZ will fk u on [rate sets] till yur [sic] blue int he [sic] face … they will deny but they will fk u liek [sic] you are being done by a russian hooker on speed," Mr Radford said to Mr Lee.
Mr Lee was also involved in a conversation, in 2009, with then-Deutsche Bank trader Etienne Alexiou, and Pimco's Matthew Mulcahy.
Mulcahy: farken [rate sets] are a joke
Alexiou: shuld [sic] be more srtict [sic] rules ard [sic] it
Aelxiou: its pure mkt manipulation
Mulcahy: could we fark them?
However, the limitation period for breaches of company law is six years.
That may explain why ASIC is only prosecuting CBA for breaches which occurred in 2012 — and not further back.
The regulator may argue the conduct from 2001-2011 proves CBA staff had a pattern of behaviour which is relevant to the 2012 charges.
CBA and Westpac fight on
Commonwealth Bank was the last of the big four taken to court by ASIC, after similar allegations were levelled at ANZ, National Australia Bank and Westpac.
ANZ and NAB reached settlements with ASIC, agreeing to pay $50 million each for attempted market manipulation between 2010 and 2012.
Westpac continues to fight the charges against it.
ASIC filed its proceedings against CBA just a day after it appointed Matt Comyn as its new chief executive.
"The Commonwealth Bank has co-operated fully with ASIC's investigation and we will look to engage constructively with ASIC in order to resolve this matter," CBA's spokesperson said.
The banks will face further scrutiny next week, with the first round of hearings of the royal commission into misconduct in the financial services industry scheduled to begin on Tuesday.
The first hearings will focus on lending practices and each of the big four will be examined as case studies in areas ranging from mortgages to credit cards to car loans.