Banks lawyer up as collusion case gets day in court

Competition body’s forex manipulation charges to be tested

● The Competition Commission can expect to encounter strenuous objections and hordes of lawyers when it finally has its day in court in a case in which it accuses 28 local and foreign banks of colluding in rand-dollar foreign exchange trading between 2007 and 2013.

The commission this week announced that it has referred the now rather elderly case to the Competition Tribunal, filing a fresh charge sheet against the banks after the Competition Appeal Court earlier this year ordered that a new charge sheet be filed — and that the commission show that the alleged collusion to manipulate the exchange rate directly affected consumers and the South African economy.

The referral this week follows lengthy litigation in the competition court and the Constitutional Court by some of the original 19 banks the commission referred to the tribunal in 2017, with banks initially challenging the commission’s complaint as being so “vague and embarrassing” that they couldn’t meaningfully respond to it.

They are also arguing that SA’s competition authorities had no jurisdiction over trading that had taken place in New York, some of which involved foreign banks that had no presence in SA.

But the Competition Appeal Court’s February ruling in favour of the commission has enabled the case to go ahead.

Competition commissioner Tembinkosi Bonakele said on Thursday: “These charges will not go away … It is the responsibility of the South African authorities to get to the bottom of these serious allegations about the manipulation of our currency.”

The commission has added three new banks — Nedbank, Rand Merchant Bank and Standard Americas — that were not part of the original case, which relates to the activities of traders in the dollar-rand exchange rate in New York during the period.

The traders communicated through online chat rooms and one banker said this week that it appeared the commission’s case rested mainly on the argument that if they all participated in a chat room, they must have been colluding.

Even if the New York traders made a habit of chatting, lawyers say it is not clear how the commission will show that they had any effect on the level of the rand exchange rate, or the economy.

Daily average turnover in the rand foreign exchange market is about $72bn (R1.2-trillion), including trade in SA and global financial centres.

The commission first announced its probe into the banks in May 2015, after the US authorities prosecuted several global banks for collusion to fix exchange and interest rates.

An investigation by the South African Reserve Bank and Financial Services Board in 2015 found no evidence of misconduct or illegality, though it did recommend some improvements to the conduct of the market.

Citi and Absa, then a subsidiary of UKbased Barclays, applied for corporate leniency and agreed to settle with the commission in 2017, in return for providing information. Citigroup and Barclays were among those that pleaded guilty to US justice department charges of rigging currency rates in 2015.

Three new banks not part of the original case have been added