ASIC Accuses ANZ of Manipulation, but Investors Don’t Care

Last Friday, the Australian Securities & Investments Commission (ASIC) launched legal proceedings against ANZ Banking Group [ASX:ANZ]. ASIC believes ANZ had manipulated interest rates almost six years ago. ASIC is working quickly to prosecute, before a statute of limitation no longer gives them the right.

ASIC launched a 79-page submission on Friday. The prospections shed light on the world of bond trading and its verbal shorthand. Even though foul language is not accepted, its commonplace to hear across many different industries. And the banking industry just might be the most foul-mouthed in Australia.

I want this rate set as high as f—— possible.’ This was the language highlighted in ASIC’s report. However, it’s not the use of that expletive that’s troubling. Instead, ASIC’s problem is with ANZ traders that were actively trying to manipulate the bank bill swap rate (BBSW).

The BBSW is a key rate that determines the pricing loans across the economy. In fact it prices billions of bonds. Of course, manipulating this rate would severely disadvantage customers. And this is not some one-off occurrence either. In fact, it’s believed that ANZ has done this on 44 separate occasions in a span of two years.

And it’s not just ANZ distorting the market either. ASIC are now in ongoing investigations of the remaining three big Australian banks. ASIC are in the process of gathering telephone records and other forms of communication. Through their findings, ASIC has discovered similar evidence being used against ANZ.

It makes you wonder, when will corruption in the banking sector stop? ANZ’s actions have likely caused financial detriment to various customers. And the one thing that ANZ is nervous about is a potential class action case.

The stakes are definitely high for ANZ, as their financial services licence is on the line. But just think of this as like a licence to drive. If ANZ lose their licence then they will not be able provide financial services. However, cases brought against market manipulation might be hard to prove.

A market manipulation case is rarely successful unless there is a guilty plea. And so far ANZ have rejected allegations, promising to defend them vigorously. But ‘if this succeeds, ANZ Bank’s reputation will be in tatters. It’s not just a technical breach, hence why ANZ will fight it tooth and nail, because their whole professional reputation will be at stake,’ said Michael Adams, a Law Professor at Western Sydney University.

Should you buy ANZ shares?

ANZ’s share price has rallied recently. Last week, the share price added 10.18% to shareholders value, closing on Friday at $25.09 per share. The returns were most likely spurred on from analyst believing banking shares were cheap. And, of course, since ANZ has fallen the furthest, investors saw to make the most out of their investment.

This morning shares opened more or less in line with Friday’s close. ASIC’s allegations towards ANZ hasn’t done must in swaying investors confident. The fact that it’s hard to prove market manipulation might be the reason why investors are still willing to buy. Or it could be that traders are seeing technical signs that would indicate a rally in ANZ’s share price.

Banks and resource stocks are all the rage at the moment. Global markets have oversold both sectors. Now the buyers are hitting back. Many believe these stocks are cheap (historically) and are looking to make it big on beaten down blue chips.

In fact, there are many beaten down blue chips out there that barging buyers are now starting to look at. ANZ could be a good example of this. Since April last year, ANZ’s share price has fallen over 30%. This would be considered cheap, especially with no fundamental shift within ANZ itself.

But if you want to know how to identify beaten down blue chips, check out Money Morning Publisher Kris Sayce’s report ‘Five Beaten–Down Aussie Blue–Chips to Buy Today’. Kris will reveal the common denominator that makes beaten down blue chips a buy in today’s market.

To get your free copy right now, click here.

Härje Ronngard,

Junior Analyst, Money Morning


Money Morning is Australia’s most outspoken financial news service. Your Money Morning editorial team are not afraid to tell it like it is. From calling out politicians to taking on the housing industry, our aim is to cut through the hype and BS to help you make sense of the stories that make a difference to your wealth. Whether you agree with us or not, you’ll find our common-sense, thought provoking arguments well worth a read.

Money Morning Australia is published by Fat Tail Investment Research, an independent financial publisher based in Melbourne, Australia. As an Australian financial services license holder we are subject to the regulations and laws of Corporations Act and Financial Services Act.


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