Australia's Westpac Banking Corp was cleared by a court of accusations it rigged a key rate to boost profit, but the win on Thursday against a regulator was dampened by an additional finding of unconscionable conduct by the bank. The mostly favourable ruling for the No. 2 Australian lender was a rare bright spot for an industry facing daily allegations of malfeasance and fraud in a year-long public inquiry that has wiped billions of dollars from companies' market values.
It also puts pressure on the Australian Securities and Investments Commission (ASIC), which brought the case against Westpac, to step up its policing. The regulator has faced criticism in the same inquiry for failing to rein in the country's biggest financial industry participants.
In a series of civil lawsuits, ASIC accused the country's "big four" banks of rigging the Bank Bill Swap Rate (BBSW) - a benchmark interest rate in Australia used to price trillions of dollars of assets - to inflate profit.
Westpac, which was accused of rate rigging from 2010 to 2012, was the only bank to defend the action after the other three - Commonwealth Bank of Australia, National Australia Bank and Australia and New Zealand Banking Group - settled before hearings began.
"In summary, I have rejected ASIC's case," Federal Court judge David Beach said. However, he noted that while Westpac did not break the law its actions amounted to "unconscionable conduct and misleading or deceptive conduct". The bank also contravened its financial services obligations through "inadequate procedures and training", the judge added.