BNP Paribas has promised ASIC it will clear up its act after it suspected its traders were trying to influence Australia's benchmark interbank lending rate.
In November 2012, BNP reported to ASIC that it had discovered that between 2007 and 2010 some of its traders had potentially tried to rig the benchmark interbank lending rate. They may have tried to influence the bank's BBSW submissions, based on how those submissions could benefit the bank’s derivatives positions, ASIC said.
At ASIC's request, BNP hired an independent expert to conduct a review of BBSW submissions. The probe found communications between derivatives traders in Singapore and BNP's Sydney treasury desk which discussed the preferred setting for the rate.
However, the expert found any market impact was not significant, ASIC said. The expert found the maximum possible benefit for BNP was $760,000 during the period under review.
The bank has now submitted an enforceable undertaking regarding how it deals with the Australian bank bill swap rate (BBSW) to ASIC, which was accepted and is now enforceable in court.
BNP will also make a “voluntary contribution” of $1 million to fund independent financial literacy projects in Australia, ASIC said.
But BNP remained a member of the BBSW submissions panel until a new method for calculating the interest rate began on 27 September last year.
International media have already slated the punishment as too light, with a headline from The Wall Street Journal claiming BNP had its "knuckles rapped" by the Australian regulator for rate setting.
The European Union requires BNP – a French-owned bank – to take part in setting Australian interest rate benchmarks, in order to keep the benchmarks reliable.
The BBSW is the primary interest rate benchmark used in Australian financial markets, although ASIC said the way it is calculated differs substantially from the London Interbank Offer Rate.
Since mid-2012, ASIC has been undertaking inquiries of BBSW panel bank members in relation to the integrity of their involvement in the submission process. ASIC's inquiries in relation to the rate set are continuing.