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Australia’s corporate watchdog sues Westpac over alleged insider dealing and breach of license due to the lender’s role in a $ 12 billion ($ 9.3 billion) debt deal linked to the privatization of the major electricity distributor in the country.
The case, which the Australian Securities and Investments Commission presented on Wednesday, is expected to illuminate the opaque world of derivatives trading and the domestic market controls to the second largest bank in the country by assets.
The allegations come as Westpac tries to rebuild its reputation after allegations of money laundering and public research in the misbehavior of the financial sector.
In a statement, Asic said the insider allegations related to Westpac’s role in executing the largest interest rate swap transaction in Australia’s history on behalf of pension funds who bought Ausgrid, an energy company, from the New South Wales government in 2016.
Asic alleges that several Westpac traders and executives knew the pension funds had chosen the bank to handle the huge transaction, which aimed to cover interest rate risk related to a syndicated debt agreement needed to the purchase.
On October 20, 2016, the day the Ausgrid deal was announced, Westpac executed several hundred transactions that raised the prices its pension fund customers would have to pay for interest rate swaps. interest, as alleged by the watchman in documents filed in the Australian federal court.
The pension fund consortium, which included Australian Super and MFI investors with assets managed for more than A $ 300 billion, was able to observe that prices were moving to the detriment of the morning of the debt transaction, but could not know that was due to Westpac trading, Asic. supposed.
Westpac said he took the allegations “very seriously.” Its shares gained 0.2% on Wednesday.
Analysts said the case could deepen Westpac’s efforts to restore its reputation dirty last year, when he paid a $ 1.3 billion fine for money laundering charges that cost Brian Hartzer, then chief executive, his job.
Elizabeth Sheedy, an expert in financial regulation at Macquarie University, said the insider trading case was unusual because it was against an institution rather than individuals.
“In theory, the bank’s policies and systems should have prevented anything similar from happening, but we already know that Westpac’s operational risk management systems were not up to date at the time of the alleged facts,” he said.
Sheedy said the case would be important to Asic, which last year lost a lawsuit against Westpac related to responsible lending laws.
Nathan Zaia, an analyst at research group Morningstar, said the allegations were badly reflected on Westpac following a government-commissioned public inquiry two years ago into financial sector fraud.
But he said the bank’s significant investments in risk management and corporate culture since 2016 could help prevent this misbehavior in the future.
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