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Commonwealth Bank (ASX: CBA) has been taken to Federal Court by the corporate regulator over allegations it engaged in "unconscionable conduct and market manipulation" in relation to setting a key benchmark for setting the price of loans.
The Australian Securities and Investments Commission (ASIC) commenced proceedings in the Federal Court in Melbourne over its alleged involvement in setting the bank bill swap reference rate (BBSW) between 31 January 2012 and October 2012.
The BBSW is the primary interest rate benchmark used in Australian financial markets to price billions of dollars in loans, bills, bonds and securities.
The ASIC case alleges that CBA, number one in our Sydney Top 50 Companies List, had a large number of products which were priced or valued off BBSW.
ASIC alleges that on three specific occasions CBA traded with the intention of affecting the level at which BBSW was set so as to maximise its profits or minimise its losses to the detriment of those holding opposite positions to CBA's.
ASIC alleges it was unconscionable for CBA to trade in this way, and also to enter into products priced off the BBSW without disclosing its trading practices to its customers and counterparties. ASIC also alleges that CBA's trading created an artificial price and a false appearance with respect to the market for some of these products.
In November, ANZ and NAB settled with ASIC and paid a combined $100 million penalty for their involvement in the rigging of overnight bank bill swap rates after the settlement was ratified by the Federal Court.
Justice Jayne Jagot at the time said the public would be "shocked, dismayed and disgusted" by their behaviour as they attempted to manipulate the market between 2010 and 2012.
Westpac is also still the subject of a similar court action from ASIC but is expected to fight the charges.
CBA released a statement on the ASX saying it has fully co-operated with ASIC over the last two years and that it disputes the allegations.
THE Commonwealth Bank is also facing a potential massive class action from shareholders because of a big drop in its share price following allegations last Auigust it was involved in money laundering operations.
Law firm Maurice Blackburn and litigation funder IMF Bentham are running the class action which will seek to recover compensation for investors when CBA's share price dropped on the news that the Australian Transaction Reports and Analysis Centre (AUSTRAC) filed its court case against the bank.
AUSTRAC, which is the federal government's financial crime agency, filed its claim alleging CBA failed to notify it of more than 53,000 transactions at its network of so-called 'intelligent' automated cash deposit machines (IDMs), with a total transaction value of $624 million.
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