'Paltry' BBSW penalty for Westpac

Westpac will pay the maximum penalty - A$3 million - for its unconscionable conduct and breaches of its financial services licensee obligations for its trading in the bank bill swap market on five occasions in 2010.

Justice Jonathan Beach on Friday noted that was "the maximum penalty that can be ... Clearly this is inadequate, but there we are."

Beach added that "it is obvious that such a paltry penalty will go nowhere close to achieving objectives" of deterrence.

"If I had been permitted to do so, I would have imposed a penalty of at least one order of magnitude above $3.3 million in order to discharge such objectives. But I am not free to do so."

The judge wrote that "Westpac is on any view a sizeable corporation with the means to pay a substantial penalty.

"Second, Westpac's unconscionable conduct was deliberately engaged in.

"Short Term Interest Rate Risk (STIRR) employees monitored Group Treasury's BBSW Rate Set Exposure on each trading day and they traded with that knowledge.

"Third, the contravening acts extended across a significant period. The conduct was evidently not a once off, and Westpac had ample time to identify and eradicate it."

Beach pointed out that "Westpac had an important role in the administration of financial markets during the relevant period through its membership of and participation in AFMA.

"Imposing the maximum penalty permitted in law will at least send the correct signal to the marketplace. In other words, market players will know that future conduct seeking to interfere with or manipulate key benchmark rates, is likely to attract pecuniary penalties close to or at the maximum levels permitted in law, whatever that maximum is from time to time."