Top SA banks face fines

‘THEY COLLUDED TO FIX PRICES, MANIPULATED BIDS AND OFFERS’

SIXTEEN local and international banks are facing fines of up to 10% of their annual turnover after the Competition Commission decided to prosecute them for colluding to fix prices and allocate markets while trading foreign currency (forex) from 2007.

Among the banks referred to the Competition Tribunal for prosecution are major banks Investec, Standard Bank and Absa. The commission will also prosecute megabanks Bank of America Merrill Lynch, JP Morgan, HSBC, Standard Chartered, Credit Suisse and Nomura.

The commission found that the banks breached the Competition Act by colluding on prices dealers at these banks quoted customers to buy the rand or dollar (offers) and the prices these dealers paid for these currencies on the market (bids). The dealers also colluded on the difference between the two prices (the bid-offer spread).

Dealers allegedly manipulated their bids and offers through agreements to refrain from trading. Sometimes they created “fictitious” bids and offers and used messaging platforms such as Bloomberg instant messaging to coordinate their activities.

Competition Commissioner Tembinkosi Bonakele said the referral of the case would give the banks a chance to “answer for themselves”.

A spokesman for Investec said it would cooperate with the competition authorities.

Standard Bank and Standard Chartered declined to comment.

The commission is seeking an administrative penalty of 10% of annual turnover during all of the years they breached the Competition Act – from 2007 until the commission began investigating in 2015 – from all of the banks except Absa and parent Barclays Plc.

“[This is] because they cooperated with the investigation and have applied for immunity in terms of the corporate leniency policy,” said commission spokesman Sipho Ngwema.

A spokesman for Absa, who cannot be named because of bank policy, declined to comment on its application for leniency.

The Reserve Bank concluded a similar investigation in 2015, which found that many of the same entities probed by the commission were guilty of sharing confidential client information which was in contravention of the regulations.

The bank’s foreign exchange review committee, chaired by former deputy governor James Cross, also found that the financial institutions failed to routinely monitor communication between their forex dealers.

The dealers escaped more serious misconduct or malpractice charges, with deputy governor Daniel Mminele noting that the review committee was restricted to investigating domestic markets only because it had no jurisdiction offshore.

Reserve Bank spokesman Jabulani Sikhakhane said the review saw room for improvement in overall market conduct, making several recommendations in this regard.

Among these were proposed amendments to regulations to give the Financial Services Board powers to declare a draft code of conduct drawn up for the forex market a subsidiary legislation.

The SA Reserve Bank has welcomed decision by the Competition Commission to refer local and foreign-owned banks to the Competition Tribunal.