The case was filed against ANZ this year, with the bank pledging to vigorously defend the action. It has since reinstated the roles of four traders. In standing up to ASIC, ANZ and Westpac claim that the regulator doesn't quite get the nuances of interest rate markets, and why the traders acted in the way they did. Unavoidable consequence Their response implies that the traders' actions – which involved dumping a whole lot of bank bills on to the market when they needed the rate to be set higher, and selling them when a lower set was required – was one of the tools they used to protect the banks from their exposure to interest rate risk. It's a risk that is an unavoidable consequence of their large funding tasks and even larger loan books. Alexiou said he complained three times about the actions of fellow ANZ traders and executives within the treasury team and the markets division. In the first instance, which took place in February 2013, he said he complained about a large derivatives position taken to hedge the interest rate risk of the bank's book of variable home loans. The bank subsequently increased its issuance of bank bills in a move that would, all else being equal, have pushed up short-term money market rates, and favoured its derivatives position at the expense of the counter-parties.

The second incident is completely different and involves an offshore bond issue in August 2014. A month earlier, Alexiou alleges, executive Adrian Went presented a paper to an ANZ committee. The paper warned that David Murray's Financial Systems Inquiry would advocate "bail-in" provisions being applied to senior unsecured bonds, effectively devaluing them. That led to a suggestion that ANZ should sell its holdings of Australian bank unsecured bonds ahead of the release of the Murray review. Alexiou disagreed, but did agree not to accumulate more bonds. However, he said he claimed the bank's decision to raise $US2.25 billion of unsecured bonds as part of its annual funding plan was unethical because this was the type of structure it was recommending its traders sell. Contentious A postscript to this point; the FSI was not definitive in its call for unsecured bonds to be considered "bail-in" securities, and the banks have subsequently issued tens of billions of this form of funding into the domestic and foreign markets. A third complaint, according to the court documents, was a "Bloomberg chat" that Alexiou was made aware of in which an ANZ treasury staffer complained that the global markets traders were "pushing" or moving the cost of derivatives required by the banks to hedge offshore bond issue. This is contentious, and potentially "insider trading", Alexiou believed, because it came ahead of an upcoming bond issue which would increase demand for and therefore the price of these contracts.

Alexiou said in the documents that when he raised his concerns, the head of funding at ANZ Treasury confirmed he informed a trader in the global markets division, that he was intending to issue unsecured bonds. In bringing these complaints to the court's attention it seems Mr Alexiou is attempting to highlight that ANZ's questionable culture extended beyond bad behaviour to include misconduct in markets. These are by no means slam-dunk allegations and are unlikely to unsettle ANZ, even in this heated political climate. But there are some important take-aways. One is the apparent and questionable closeness of ANZ's global markets traders, who are meant to face clients, and the Treasury team, which funds the bank and by extension the economy. This was also evident in ASIC's case against ANZ. To maintain the integrity of interest rate markets and prevent potential abuse, more should have been done to keep these functions apart. And like the issues raised by ASIC in the BBSW case, these incidents show that these rates and derivative markets that are critical to funding the economy are opaque and open to potential abuse.