Following the legal action against banks in Australia for potential manipulation of the BBSW
, banks have become more risk averse, and require more legal certainty around what constitutes acceptable practice during the rate set, before they resume full participation.
Following ASIC enquiries, RBS reported to ASIC that it had found evidence of conduct seeking to influence its BBSW
submissions, based on how the submissions may benefit RBS's derivatives positions.
BNP however, stayed a member of the BBSW
submissions panel till a new methodology for calculating the BBSW
was executed on 27 September 2013.
Seven traders within the bank's institutional banking division were suspended in November 2014 after ASIC flagged bad behaviour within the BBSW
At ASIC's request, BNP engaged an independent expert to conduct a review of BBSW
The calculation of BBSW
substantially differs from the method that is used to calculate the London Interbank Offer Rate (LIBOR), in that BBSW
submissions were required to be based on the panel banks' view of the average mid-rate for Reference Bank Bills, which are of similarly high credit standing, at a particular point in time each day as opposed to a subjective view of the bank's cost of obtaining unsecured funding from other banks.
At ASIC's request, UBS engaged an independent expert to conduct a review of BBSW
The pricing represents a margin of 170 basis points over BBSW
once fully swapped back into Australian currency.
Medcraft has used strong language in the past in addressing the issue of BBSW
and FX manipulation but was at his severest when he said that he had the support of the government to use USD50m of funds to fight the banks.
At the same time, Bank of Queensland, rated at BBB+ by Standard & Poor's and Fitch, is said to sell a two-and-a-half-year bond at around 145 basis points over BBSW
, according to fund managers.
The debt will be repo-eligible with Australia's central bank and is expected to price at 190 basis points over swap and BBSW
, Reuters reports citing a term sheet it has obtained.
After ASIC made enquiries, RBS reported that it had found evidence of conduct seeking to influence its BBSW