HARM?

Con­trary to pop­u­lar be­lief, the col­lu­sive dam­age wrought by 17 banks may be rel­a­tively mi­nor

CityPress - - Business - DE­WALD VAN RENS­BURG de­wald.vrens­burg@city­press.co.za

For all the out­rage di­rected at banks this week, it is dif­fi­cult to as­cer­tain the ex­act dam­age that col­lu­sion among cur­rency traders would have done – and to whom. The bank­ing in­dus­try has been un­der po­lit­i­cal at­tack from an ar­ray of par­ties, rang­ing from gov­ern­ment – in the form of Pres­i­dent Ja­cob Zuma and Min­is­ter of Min­eral Re­sources Mosebenzi Zwane – to the Gupta fam­ily and the Pro­gres­sive Pro­fes­sion­als’ Forum.

This week, trade unions and po­lit­i­cal par­ties – no­tably, the ANC and the Eco­nomic Free­dom Fight­ers – is­sued uni­formly scathing at­tacks on the banks, af­ter al­le­ga­tions of price-fix­ing and other ir­reg­u­lar­i­ties were made by the Com­pe­ti­tion Com­mis­sion.

The col­lu­sion case, in­volv­ing 17 banks – three of which are ma­jor lo­cal banks Absa, In­vestec and Stan­dard Bank – will in­volve a mas­sive bur­den of proof to show ex­actly what dam­age was in­flicted be­tween 2007 and 2013.

But ex­perts and one in­sider say the dam­age is likely to be a frac­tion of what South Africans seem to be­lieve.

On Fri­day, the Com­pe­ti­tion Tri­bunal re­leased the full re­fer­ral it had re­ceived from the Com­pe­ti­tion Com­mis­sion, spell­ing out the ac­cu­sa­tions in de­tail and nam­ing the in­di­vid­u­als in­volved at each bank in each in­stance of al­leged col­lu­sion.

The re­fer­ral sug­gests that the co­op­er­at­ing banks and traders have pro­vided records of their com­mu­ni­ca­tions with traders at other banks to fix prices and di­vide the mar­ket.

There are no al­le­ga­tions that do not in­volve Absa, suggest­ing that the bank’s records have been cen­tral to the case be­ing made.

The com­mis­sion is also re­ly­ing on for­eign in­stances, where guilt has al­ready been es­tab­lished, to sup­port a sub­stan­tial part of its lo­cal in­ves­ti­ga­tion.

A sin­gle trader, Amer­i­can Ja­son Katz, ap­pears to be the sole rea­son for at least two of the banks ap­pear­ing in the lo­cal probe.

Katz is cited as hav­ing taken part in the col­lu­sion on rand ex­changes when he worked for BNP Paribas SA as well as at Stan­dard New York (un­re­lated to Stan­dard Bank) and Bar­clays.

Last month, in a New York court, he pleaded guilty to par­tic­i­pat­ing in a con­spir­acy to ma­nip­u­late emerg­ing mar­ket cur­rency trades, and was sub­se­quently barred from par­tic­i­pat­ing in the bank­ing in­dus­try.

Fol­low­ing suit a week later was Christo­pher Cum­mins of Citibank. He is an­other US trader cited in the com­mis­sion’s case who pleaded guilty to ma­nip­u­lat­ing ex­change rates.

Citibank has ap­plied for le­niency in South Africa and will be co­op­er­at­ing with the com­mis­sion along­side Absa, its par­ent com­pany Bar­clays and fel­low sub­sidiary Bar­clays Cap­i­tal.

The man most cited for col­lud­ing at Absa is Dun­can Howes, who was sus­pended in 2015, ac­cord­ing to Bloomberg re­ports.

The com­mis­sion is not seek­ing any penal­ties against Absa, Bar­clays, Bar­clays Cap­i­tal or Citibank. It is, how­ever, pur­su­ing the max­i­mum 10% an­nual turnover fine against all the other banks, which would amount to an as­tro­nom­i­cal sum.

THE DAM­AGE DONE

It is im­pos­si­ble that the col­lu­sion al­leged in this case could have caused the rand to trade at a mean­ing­fully dif­fer­ent

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