National Australia Bank will fight legal action launched by the corporate watchdog, which alleges it manipulated the bank bill swap reference rate.
NAB said it had fully co-operated with a review conducted by the Australian Securities and Investments Commission and took the allegations seriously.
The bank had provided ASIC with emails, instant chat messages and telephone conversations involving NAB employees.
"We do not agree with ASIC's claims which means they will now be settled by a court process," NAB Group Chief Risk Officer David Gall said in a statement.
The case has given fresh ammunition to Labor's call for a Banks Royal Commission.
"The evidence is growing by the day - it's time for a royal commission into the banks," Opposition Leader Bill Shorten said in a statement.
"How many more people need to suffer and get ripped off before Mr Turnbull stops covering up for the banks."
ASIC said the case had been launched in the Federal Court in Melbourne on Tuesday, with NAB accused of unconscionable conduct and market manipulation.
"It is alleged that NAB traded in a manner that was unconscionable and intended to create an artificial price for bank bills on 50 occasions during the period of June 8, 2010 and December 24, 2012," ASIC said in a statement.
ASIC alleges NAB had a large number of products priced or valued off BBSW and that it traded in the bank bill market with the intention of moving the BBSW higher or lower.
"ASIC alleges that NAB was seeking to maximise its profit or minimise its loss to the detriment of those holding opposite positions to NAB's," it said.
The BBSW is the primary interest rate benchmark used in Australian financial markets, administered by the Australian Financial Markets Association and used to calculate business and personal lending rates.
Since September 2013, AFMA has calculated that rate electronically based on market data.
Before that, the rate was calculated on information from up to 14 banks based on interest rates they were paying and receiving each day.
ASIC began investigating manipulation of the BBSW in 2012.
It's already accepted enforceable undertakings from a number of overseas bank and in March it launched action against ANZ and Westpac in April.
ASIC said it would be seeking declarations that NAB contravened the ASIC and Corporations Acts and unspecified pecuniary penalties.
Trade Minister Steve Ciobo said this reinforced the government's view that a royal commission wasn't needed because ASIC had sufficient powers.
"Our view is that already these powers are available and they will be utilised," he told ABC television.
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