The Australian Securities and Investments Commission has commenced legal proceedings against National Australia Bank in the Federal Court in Melbourne, alleging "unconscionable conduct and market manipulation in relation to NAB's involvement in setting the bank bill swap reference rate." The BBSW is the primary interest rate benchmark used in Australian financial markets.Further, ASIC said it would be seeking pecuniary penalties against NAB and an order requiring NAB to implement a compliance program.The action, flagged yesterday, is based around allegations by ASIC that NAB traded in a manner that was "... intended to create an artificial price for bank bills on 50 occasions during the period of 8 June 2010 and 24 December 2012." ASIC alleged, in particular, that NAB's actions "had, or were likely to have, the effect" of both "raising or maintaining" and "lowering or maintaining" the BBSW rate in order to maximise its profit or minimise its loss "to the detriment of those holding opposite positions to NAB's."At that time, the BBSW rate set involved daily input by 14 panellists, reflecting their view of the mid-rate for AFMA prime bank paper at 10 am each day. (Over the period in question, the six AFMA "prime banks" were the four major Australian banks, plus BNP Paribas and JP Morgan). The following year, the Australian Financial Markets Association, which administers the BBSW, changed its methodology to draw directly on trading data.This latest announcement from ASIC continues an emerging pattern of Federal Court actions against the major banks, all alleging interest rate-setting manipulation: 4 March 2016 - Australia and New Zealand Banking Group; 5 April 2016 - Westpac Banking Corporation; and 7 June 2016 - National Australia Bank.(And it should be remembered that back in 2014 the corporate regulator secured a voluntary contribution of A$1.6 million from the Royal Bank of Scotland to finance independent financial literacy projects in Australia, along with enforceable undertakings of $1 million each from UBS and BNP Paribas after those banks admitted to "potential misconduct" in their BBSW submissions.)Not surprisingly, NAB denied the allegations. Its group chief risk officer, David Gall, summarised the charges and responded in a statement to the ASX, saying "NAB has fully co-operated with ASIC's review and takes these allegations seriously. We do not agree with ASIC's claims which means they will now be settled by a court process."His statement also noted that, "as part of ASIC's investigation NAB has provided emails, instant chat messages and telephone conversations involving our employees. NAB retains this information as part of our business processes."Gall concluded: "As this matter is now before the court, it is not appropriate to comment further."