Tribunal targets 20 top SA banks
Forex collusion is alleged
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.