‘Price-rigging’ banks face billions

If all 17 institutions are penalised, the country’s R140-billion budget deficit could be wiped out in one fell swoop

If South Africa’s Competition Commission were to succeed in its price-fixing case against some of the world’s biggest banks, it would be enough to wipe out the country’s budget deficit, a commentator said on Thursday.

The commission is seeking massive fines against 17 banks for their hand in allegedly manipulating the rand-dollar currency trade over eight years. Implicated banks include Absa, Standard Bank and Investec, as well as international majors JPMorgan Chase, BNP Paribas and Standard Chartered.

On Wednesday, the commission said it had asked the Competition Tribunal to levy an administrative penalty of 10% of annual turnover — the highest applicable penalty under the Competition Act — against all the banks concerned.

Spread across 17 institutions, the penalties could be extensive if awarded. In the case of Standard Bank alone, the bank’s annual revenue in 2015 was R91.1-billion, suggesting that a fine could equate to about R9.1-billion.

Kokkie Kooyman, a portfolio manager

“It won’t sink any of the banks, but it will be painful,” he said.

According to the 2016 budget, the deficit stood at about R140-billion.

The commission claims that, from at least 2007, the implicated banks had colluded to influence the prices on spot currency trades — trades in which prices are agreed on the spot and paid for quickly — involving the United States dollar and the rand.

The commission said the respondents had also manipulated prices when dealers unlawfully agreed to hold back from trading at particular times, and had created fictitious bids and offers.

The allegedly unlawful trading was carried out mainly on the Reuters currency trading platform, with traders using the Bloomberg instant messaging system, telephone conversations and meetings to co-ordinate their trades in an attempt to buy or sell currencies at a desired price.

The commission said the traders would agree to post fake bids or offers, creating a false impression of oversupply, which would then drive the agreed currency price (either the rand or the dollar) upward. They also shared information about customers so that they could co-ordinate their quotes to them.

The motivation to collude and manipulate prices boils down to simple self-enrichment, said

Photo: Mike Hutchings/Reuters In trouble: Local banks have agreed to co-operate with the competition authorities and some may have to cough up.