Australia’s Westpac found guilty of misconduct in 2016 rate swap deal By Reuters



© Reuters. FILE PHOTO: A pedestrian looks at his phone as he walks past a logo for Australia’s Westpac Banking Corp located outside a branch in central Sydney, Australia, November 5, 2018. REUTERS/David Gray/File Photo

(Reuters) – Australia’s corporate regulator said on Wednesday that a court found Westpac engaged in unethical conduct while carrying out an A$12 billion ($7.88 billion) interest rate swap transaction in 2016, the largest of its kind in the country.

The Australian Securities and Investments Commission (ASIC) said Westpac, one of the country’s biggest banks, will pay a maximum penalty of A$1.8 million, along with A$8 million for the regulator’s litigation costs.

Westpac allegedly engaged in pre-hedging ahead of the transaction with a consortium comprising AustralianSuper, the country’s largest pension fund, and IFM.

Pre-hedging involves trading to hedge any anticipated risk ahead of a potential transaction.

The swap deal in October 2016 was intended to manage interest rate risks associated with the consortium’s purchase of a majority stake in electricity provider, Ausgrid, from the New South Wales Government.

“In this case, Westpac’s behaviour was unconscionable and exposed its client to significant risk. Westpac’s conduct was also in stark contrast with several other banks,” ASIC Deputy Chair Sarah Court said in a statement.

Westpac did not immediately respond to a Reuters’ request for comment. ($1 = 1.5235 Australian dollars)



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