Australia and New Zealand Banking Group and Westpac Banking Corp have signed enforceable undertakings to change their practices after the Australian regulator found inappropriate conduct in their wholesale foreign exchange businesses, following similar signings by their peers National Australia Bank and Commonwealth Bank.
Each bank will pay A$3 million to Financial Literacy Australia under the deal with the Australian Securities and Investments Commission (ASIC). The agreements round out action taken by ASIC against Australia's big four banks.
ASIC says it is "concerned that between January 1, 2008 and June 30, 2013 both banks failed to ensure that their systems and controls were adequate to address risks relating to instances of inappropriate conduct identified by ASIC."
On several occasions in that time period, Westpac employees disclosed confidential details of pending client orders to external traders and inappropriately shared confidential information about Westpac's or another bank's orders in the course of fix order management and execution, ASIC said. On at least one occasion, Westpac employees worked with external parties to share confidential information.
ANZ employees disclosed specific confidential details of pending customer orders to external third parties and "traded in a manner which was potentially inconsistent with a proper approach to market making or hedging" on a number of occasions in the five-year time period, ASIC said.
Both ANZ and Westpac will now develop programmes of changes, to be assessed by an independent consultant appointed by ASIC at implementation and annually for the three years following. Senior executives will also provide an annual attestation to ASIC that their FX trading controls are sufficient.
ASIC said it was grateful to New Zealand's Financial Markets Authority, along with the UK Financial Conduct Authority and the Monetary Authority of Singapore, for its help with the investigation.
The Australian regulator already has enforceable undertakings with National Australia Bank and the Commonwealth Bank of Australia, who each paid $A2.5 million to fund independent financial literacy projects in Australia.
Last week, the Commerce Commission said it had finished looking into potential collusion among New Zealand's foreign exchange traders without unearthing any evidence that would warrant enforcement.
The Wellington-based regulator launched an investigation into possible manipulation of currency markets in 2014 after a whistleblower looked to use the commission's leniency policy offering immunity to the first cartel member who comes clean, but isn't considering any further action after completing its probe.
ASIC also filed proceedings against ANZ earlier this month over the lender's involvement in setting the bank bill swap reference rate (BBSW) between March 2010 to May 2012. ANZ rejected the claim, saying it will defend the suit.
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