The Australian Securities and Investments Commission has cast a broad net over the bank bill swap rate (BBSW) financial scandal, saying it could cover a massive $20 trillion worth of financial products, including superannuation.

The regulator is taking action against Westpac, NAB and ANZ in the Federal Court claiming they manipulated the BBSW which is used as a reference point in setting rates on a plethora of financial contracts.

ASIC is also expected to act against the Commonwealth Bank on the issue.

Super has been hit

Superannuation products are directly affected by movements in the BBSW.  Matt Linden director of public affairs with Industry Super Australia, which represents funds worth $500 billion, said he was now investigating whether his members were disadvantaged.

“In total, even if it was just for argument’s sake 1 per cent of the $450 billion in assets, that’s $4.5 billion,” he told the ABC.

“It’s difficult to work through the effect of when the BBSW was higher or lower but they’re certainly not small sums of money.”

Prior to filing against the major banks, ASIC’s investigations into misconduct in the BBSW resulted in enforceable undertakings from UBS-AG, BNP Paribas and the Royal Bank of Scotland. The foreign banks made voluntary contributions totalling $3.6 million to fund independent financial literacy projects in Australia.

ASIC sees its action on the issue as crucial to the integrity of the financial system.

“BBSW is a really important financial benchmark in Australia and it is used in a variety of financial products which have an impact directly or indirectly on all of our lives,” said Cathie Armour, a commissioner at ASIC.

Previous estimates put the value of products affected at around $1.5 trillion. However ASIC’s calculations show the value was more than ten times that.

“We’ve calculated that there are around $20 trillion worth of derivative products which are directly referenced to BBSW,” she said.

The banking industry, takes the view that the net effect of any alleged manipulation was likely small but still unclear.

Bankers say its minuscule

Australian Banking Association chief executive Steven Munchenberg said claims that any manipulation cost consumers billions of dollars were “completely fanciful”.

“The impact is very, very small, miniscule, and what I’m disputing is these allegations being made that somehow people are billions of dollars out of pocket as a result of these allegations,” he said.

Dr Andrew Schmulow from the University of Western Australia said the effects of movements in the BBSW were not limited to financial products.

“These manipulations will have the effect of distorting the free market, especially the market of interest rates, which in turn is the cost of finance, which is a cost like petrol, which is built into absolutely every form of goods and services in the real economy,” he said.

“Eventually these manipulations will trickle down to your mortgage, your car finance, your credit card, your personal loans and your business loans.”

Prior to filing against the major banks, ASIC’s investigations into misconduct in the BBSW resulted in enforceable undertakings from UBS-AG, BNP Paribas and the Royal Bank of Scotland . The foreign banks made voluntary contributions totalling $3.6 million to fund independent financial literacy projects in Australia.

There are concerns that the case is so complex it will exhaust ASIC’s $80 million legal war chest.

The New Daily is owned by a group of industry superannuation funds.

With Rod Myer