The undertakings were put in place after the Australian Securities & Investments Commission probed wholesale spot forex activity at the banks. The regulator said it was concerned that between 1 January 2008 and 30 June 2013, both firms “failed to ensure that their systems and controls were adequate to address risks relating to instances of inappropriate conduct identified by ASIC”.

“A well-functioning foreign exchange market depends on all participants acting with integrity and fairness. ASIC is committed to ensuring that major financial institutions have in place effective mechanisms for ensuring that their employees are trained, monitored and supervised to provide financial services efficiently, honestly and fairly,” Cathie Armour, ASIC commissioner, said in a statement.

ASIC said that it was concerned that NAB did not ensure that its systems, controls and supervision were adequate, detect and respond to misconduct. For example, it gave the example of how, on several occasions, a NAB employee on an offshore spot FX desk, acting together with an employee of another Australian bank, shared confidential information and entered offers into the trading platform without any apparent legitimate commercial reason for placing the offers.

NAB will, under its enforceable undertaking, develop a program of changes to its existing systems, controls, monitoring and supervision of employees within its foreign exchange business to prevent, detect and respond to signs of misconduct, ASIC said.

CBA
The regulator said it also found signs of misconduct by employees of CBA between 1 January 2008 and 30 June 2013. For example, on two occasions, employees on an offshore spot FX desk acquired proprietary positions in a currency after coming into possession of knowledge of large CBA fix orders in that currency. Separately, CBA employees on an offshore spot FX desk several times disclosed confidential details of pending client orders to external third parties, including identification of the client through the use of code names.

In addition to its moves to prevent such behaviour, ASIC said the bank will also make a community benefit payment of A$2.5 million towards advancing financial literacy education related to the aged care sector.

The regulator thanks international regulators in helping to investigate the issue, such as the UK Financial Conduct Authority and the NZ Financial Markets Authority.