Three SA banks in price-fixing investigation

Accusations of manipulating cost of rand through fictitious buy and sell orders

THREE of South Africa’s biggest banks – Standard Bank‚ Absa and Investec – and 14 international banks have been referred to the Competition Tribunal for price fixing.

They are accused by the Competition Commission of manipulating the price of the rand when selling and buying dollars – through making fictitious buy and sell orders to change the supply of the currency.

They are also accused of using trading chat rooms to coordinate times for the sale of rands or stop selling for a time so as to manipulate prices since 2007.

Market commentator and trader Simon Brown said it was a major announcement because “our Competition Commission [is] good at what [it does]”.

The rand also affected the petrol price and this, he said, was also why accusations of manipulating currency had implications and huge interest for South Africans.

The commission said it was “seeking an order from the tribunal declaring that the respondents have contravened the Competition Act”.

It is seeking an order declaring that Bank of America Merrill Lynch International Ltd‚ BNP Paribas‚ JP Morgan Chase & Co‚ JP Morgan Chase Bank NA, Investec Ltd‚ Standard New York Securities Inc‚ HSBC Bank plc‚ Standard Chartered Bank‚ Credit Suisse Group; Standard Bank of SA Ltd‚ Commerzbank AG; Australia and New Zealand Banking Group Ltd‚ Nomura International plc and Macquarie Bank Ltd are liable for the payment of an administrative penalty equal to 10% of their annual turnover.

Absa may escape prosecution and fines.

While neither Standard Bank nor Investec had responded to the announcement by yesterday evening‚ Absa said it would “continue to cooperate with the commission during the prosecution of this matter”.

“It should be noted that the Competition Commission has not sought any penalties against Absa.”

Brown said banking scandals had become common globally.

“We have seen so many of them‚ with accusations of banks manipulating the gold price and Libor rates in Britain. “There is a lot of dodgy stuff.” Banks never admitted they were wrong, but paid large non-admission of guilt fines‚ Brown said.

Share prices of the three domestic banks barely moved after the announcement.

Brown said this might be partly because the investigation by the tribunal would take a long time.

“I am expecting a Twitter storm. The banks are under huge pressure in South Africa.”

He said most foreign banks had domestic financial assets and of- fices that could be attached if they were eventually fined, making it not so easy to ignore local competition authorities.

The Reserve Bank has welcomed the decision to refer the banks to the tribunal.

It said it regarded the allegations in a serious light.

“The [bank] will allow the legal processes now initiated to run their course‚ and will continue to monitor developments closely to inform any action that we may need to embark upon in accordance with our mandate and jurisdiction‚” it said.

At the time of the launch of the Competition Commission’s investigation‚ a joint Reserve Bank and Financial Services Board (FSB) process was already under way to review foreign exchange operations of authorised foreign exchange dealers in the domestic market.

“The review found no evidence of serious and widespread misconduct in the South African foreign exchange market‚ but saw scope for the improvement in overall market conduct and made several recommendations in this regard.

“A number of these recommendations are being implemented‚” the bank said. – TMG Digital