S.African Investigators Find Banks Guilty of Currency Rigging

Antitrust investigators in South Africa have recommended that several of the country’s major banks be fined for price-fixing of the rand. The Competition Commission started its investigation into allegations of currency rigging by major banks in the country two years ago.

The banks identified as having participated in the collusion include HSBC Holdings Plc, Bank of America Merrill Lynch, Credit Suisse Group AG, BNP Paribas SA, JPMorgan Chase & Co. HSBC Holdings Plc, and Nomura Holdings Inc. The commission found these financial institutions to have been involved in such practices going back to 2007. The case has now been referred to Competition Tribunal.

This is the latest instance of banks being found guilty of largescale rigging, with similar prosecutions in in Europe and the United States having resulted in fines amounting to over $10 billion being levied on banks that were guilty.

Reuters

The commission’s decision comes even as South Africa’s political administration led by President Jacob Zuma is increasing its focus on curtailing the influence of four major banks on the country’s economy. Zuma has also been critical of the banks for having closed the bank accounts of a close associate who are the Guptas.

According to the commission, the institutions involved had manipulated prices through actions such as having prior agreements on bids, deliberately choosing time of offers and creating fictitious bids distorting demand and supply. Analysts are however concerned at the decision’s timing. Adrian Saville, the chief strategist at Citadel Investment Services & Cannon Asset Managers highlighted that the lenders were actively seeking to improve their conduct worldwide in recent times. here are fears that it might affect the banking industry in the country.

In a statement Asief Mohamed, chief investment officer at Cape Town-based Aeon Investment Management said,

Collusive practices must lead to consequences such as termination of the services of key management, executive and non-executive directors. The banks, if guilty, will most likely be fined and this will have a negative impact on earnings and reputation.

The Competition Commission has recommended that the banks be fined 10 percent of their turnover, the maximum possible penalty. The tribunal however is likely to decide on the penalty looking at the revenue affected by their transgressions and the time period over which such manipulations took place according to Simon Roberts, a director of the University of Johannesburg’s Centre for Competition, Regulation and Economic Development. He added that it was highly likely that a settlement would be arrived at.

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