Collusion: more banks likely to settle
MORE banks are likely to accept the Competition Commission’s invitation to co-operate with its probe into collusion in trading in the foreign-currency market, with the chances being that no single bank will have the opportunity to argue its case before the Competition Tribunal.
This is according to experts Business Report spoke to yesterday, following commissioner Tembinkosi Bonakele’s briefing to Parliament that Citibank and Absa had agreed to testify against the banks that have been implicated in the manipulation of the rand.
Yesterday, the commission said it had granted Barclays Africa’s local unit, Absa, immunity from prosecution in return for the bank’s co-operation in the graft probe.
The Absa deal came hours after Citibank paid nearly R70 million for its part in the alleged rigging of the rand, leaving Standard Bank, Investec and 14 international banks to face the music.
The commission’s spokesman, Sipho Ngwema, said the banks were welcome to settle the matter any time before the tribunal handed down judgment.
“The commission will take into account many factors in determining the appropriate penalty, if settlements are on the cards,” Ngwema said.
On Friday, the commission said it would not seek any penalties against Citibank, Absa, Barclays Capital and Barclays.
Damage control
Aeon chief investment officer Asief Mohamed said it would make sense for the banks to approach the commission, because Citibank’s and Absa’s testimonies were likely to strengthen the case against them.
“The banks would want to create certainty for shareholders and investors very quickly to ensure that damage to their brands was minimised. I would not be surprised if the commission announces more settlements in the near future. It is enticing for banks to take the settlement route,” Mohamed said.
Citibank and Absa seem to have been quick to mitigate against the bruising fines dished out to their parent companies by regulators in the US and the United Kingdom for fixing currency trades in those jurisdictions.
In 2015, Barclays was fined £1.5 billion (R24.4bn at the current exchange rate) by the UK’s Financial Conduct Authority.
The banks were welcome to settle the matter before the tribunal handed down judgment.
In the US, Citibank paid $925 million as a criminal fine and an additional $342m to the Federal Reserve.
South African Institute of Race Relations chief economist Ian Cruickshanks said the commission had to walk a tightrope between trying to punish the banks and ensuing that hefty fines did not result in their going out of business.
“We have just four major commercial banks in the country, so we also need banks such as Citibank to back the transaction of commerce and industry,” Cruickshanks said.
“The banks must accept the commission’s invitation to co-operate, to lessen the asked 10 percent fine.”However, Cruickshanks said the fact that the banks were willing to settle showed that they have enough money to deal with such matters without hurting their bottom lines.
“It gives you an insight into the huge revenues earned by the banks.”
Congress of South African Trade Unions spokesperson, Sizwe Pamla, said the commission had exposed that the country was susceptible to letting collusion go largely unpunished.
“The commission and the Reserve Bank must inform the country what the collusion has cost the economy. The banks will pass the cost of the settlement fines on to their customers”, Pamla said.