Tri­bunal tar­gets 20 top SA banks

Forex col­lu­sion is al­leged

The Star Late Edition - - BUSINESS REPORT - Ka­belo Khu­malo

THE COM­PE­TI­TION Com­mis­sion has rec­om­mended the pros­e­cu­tion of nearly 20 top lo­cal and in­ter­na­tional banks for col­lu­sion in the trad­ing of for­eign cur­rency.

The com­mis­sion said yes­ter­day it had re­ferred the banks to the Com­pe­ti­tion Tri­bunal for pros­e­cu­tion in a case that could re­sult in mas­sive fines and lengthy jail time for their di­rec­tors.

It said that it had rec­om­mended fines against No­mura In­ter­na­tional, Stan­dard Bank and In­vestec, among oth­ers, equal­ing 10 per­cent of their an­nual turnover for the col­lu­sion.

The com­mis­sion’s com­mis­sioner, Them­binkosi Bon­akele, said the re­fer­ral of the mat­ter would al­low the banks to air their side of their story.

“The re­fer­ral of this mat­ter to the tri­bunal marks a key mile­stone in this case, as it now af­fords the banks an op­por­tu­nity to an­swer for them­selves,” Bon­akele said.

Last week, while de­liv­er­ing the State of the Na­tion ad­dress, Pres­i­dent Ja­cob Zuma ap­plauded the work done by the com­mis­sion in up­root­ing col­lu­sion in the coun­try.

“The com­pe­ti­tion au­thor­i­ties have done ex­cel­lent work to un­cover the car­tels and pun­ish them for break­ing the law. Last year I signed into law a pro­vi­sion to crim­i­nalise the car­tels and col­lu­sion and it came into ef­fect on May 1. It car­ries jail sen­tences of up to 10 years,” Zuma said.

Be­sides No­mura, Stan­dard Bank and In­vestec, other im­pli­cated banks in­clude Absa, HSBC, JP Mor­gan Chase, BNP Paribas, Bar­clays and Bank of Amer­ica Mer­rill Lynch, Stan­dard New York Se­cu­ri­ties, Aus­tralia and New Zealand Bank­ing Group, Stan­dard Char­tered Bank, Bar­clays Cap­i­tal, Mac­quarie Bank, Credit Suisse Group, Com­merzbank and Bar­clays Cap­i­tal.

The com­mis­sion’s probe fol­lowed the ad­mis­sion by Cit­i­group, JP Mor­gan Chase, Bar­clays and Royal Bank of Scot­land to the UK and US au­thor­i­ties in 2015 that they had cheated clients by us­ing in­vi­ta­tion-only chat rooms to co-or­di­nate trades. The four banks were fined close to $6 bil­lion (R79.3bn) for the col­lu­sion.

The cur­rency trad­ing mar­ket is es­ti­mated to be worth $5 tril­lion a day. Last year, Euro­pean an­titrust reg­u­la­tors fined HSBC, Crédit Agri­cole and JP Mor­gan Chase a to­tal of just over 485 mil­lion (R6.8bn) for col­lud­ing to fix bench­mark in­ter­est rates tied to the euro.

The South African probe be­gan in 2015 and fo­cused on price fix­ing and mar­ket al­lo­ca­tion in the trad­ing of for­eign cur­rency pairs in­volv­ing the rand.

The com­mis­sion said it had found that since 2007 the banks had agree­ments to col­lude on prices for bids, of­fers and bid-of­fer spreads for the spot trades in re­la­tion to cur­rency trad­ing in­volv­ing US dol­lar/ rand cur­rency pair. Absa said it must be borne in mind that the com­mis­sion had not sought any penal­ties against it.

“Fol­low­ing the de­ci­sion of the South African Com­pe­ti­tion Com­mis­sion to re­fer sev­eral banks in­clud­ing Absa Bank to the Com­pe­ti­tion Tri­bunal, Absa will con­tinue to co-op­er­ate with the com­mis­sion dur­ing the pros­e­cu­tion of this mat­ter,” Absa said.

The com­mis­sion fur­ther found that the banks had ma­nip­u­lated the price bids and of­fers through agree­ments to re­frain from trad­ing and cre­at­ing fic­tion bids and of­fers at par­tic­u­lar times.

In­vestec said it was await­ing more de­tails on the move by the com­mis­sion, but would co-op­er­ate with the process.

“In­vestec will co-op­er­ate with the com­pe­ti­tion au­thor­i­ties with re­spect to their in­ves­ti­ga­tion. “Un­for­tu­nately, at this stage we still do not have fur­ther de­tail with re­spect to the na­ture of the in­ves­ti­ga­tion and are thus not able to com­ment on the mat­ter,” said In­vestec.

The com­mis­sion said it had found the im­pli­cated banks also used a com­plex method in their col­lu­sion, which in­cluded us­ing the Reuters trad­ing plat­form and Bloomberg in­stant mes­sag­ing. “They as­sisted each other to reach the de­sired prices by co-or­di­nat­ing trad­ing times.

“They reached agree­ments to re­frain from trad­ing, tak­ing turns in trans­act­ing and by ei­ther pulling or hold­ing trad­ing ac­tiv­i­ties on the Reuters cur­rency trad­ing plat­form,” the com­mis­sion said.

Stan­dard Bank spokesper­son Erik Larsen said the bank would not be com­ment­ing.

The South African Re­serve Bank said it noted the de­ci­sion and that it had al­ready be­gun re­view­ing for­eign ex­change op­er­a­tions of au­tho­rised for­eign ex­change deal­ers in the do­mes­tic mar­ket.

“The rand is a glob­ally traded cur­rency. Some 30 per­cent of daily turnover in the ZAR takes place in South Africa, and turnover with non­res­i­dents ac­counts for 57.5 per­cent of do­mes­tic turnover,” the Re­serve Bank said.

Them­binkosi Bon­akele said the re­fer­ral of the mat­ter would al­low the banks to air their side of the story.

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