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