Cape Town - The ANC has lashed out at banks accused of manipulating foreign currency trades, with the SA Reserve Bank (SARB) saying it sees the allegations in a serious light.
Several banks, including, ABSA, Investec and Standard Bank, have been referred by the Competition Commission to the Competition Tribunal for prosecution. This relates to a case of price fixing and market allocation in the trading of foreign currency pairs involving the rand.
The Commission is also seeking an order declaring that the banks are liable for the payment of an administrative penalty equal to 10% of their annual turnover.
“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,” said Commissioner Tembinkosi Bonakele in a statement on Wednesday.
The investigation, which was initiated in April 2015, related mainly to international financial institutions that had allegedly been directly or indirectly, and in collusion with each other, involved in unlawfully distorting competition in the foreign exchange market for the USD/ZAR pair in offshore financial centres.
The SARB said at the time of the launch of the Competition Commission’s investigation, a joint SARB and Financial Services Board (FSB) process was already underway to review foreign exchange operations of authorised foreign exchange dealers in the domestic market.
"This review was not informed by any allegations or whistle-blowing, but represented a proactive step on the part of the authorities in response to various other investigations that were being undertaken by international regulators."
The Reserve Bank explained that the objective of the review was to establish whether there was any misconduct or malpractice in the South African foreign exchange market, and to put forward recommendations on how foreign exchange trading practices could be strengthened to enhance the efficiency, integrity and credibility of the local foreign exchange market.
"The review found no evidence of serious and widespread misconduct in the South African foreign exchange market, but saw scope for the improvement in overall market conduct and made several recommendations in this regard."
The SARB noted that at the conclusion of the review, it was stated that should any irregularities be revealed as part of the Competition Commission’s investigation, which link violations in other international financial centres to operations of local authorised dealers, the matters would be followed up and appropriate action would be taken by regulators.
"The SARB will allow the legal processes now initiated to run their course, and will continue to monitor developments closely to inform any action that we may need to embark upon in accordance with our mandate and jurisdiction."
'Ethical crisis in banking sector'
Responding to the news, the ruling African National Congress said the alleged acts of corruption have crudely exposed what it called an ethical crisis in the South African banking sector.
"The act of manipulating the currency is an attack on the constitutional mandate of the South African Reserve Bank to protect the value of the South African currency," said spokesperson Zizi Kodwa.
"The profit-driven assault on the South African rand through such collusion and corruption by the banks flies in the face of efforts by the South African nation to prosperity for all."
The ANC said it will closely follow the developments in this case and calls for the Competition Tribunal to level against the banks the harshest possible sanction where they are found guilty.
Banks working with Commission
ABSA said it will continue to co-operate with the Commission during the prosecution of this matter, adding that no fines were brought against the bank.
"It should be noted that the Competition Commission has not sought any penalties against Absa," an ABSA spokesperson told Fin24 in an emailed response.
Investec said it too will work with the competition authorities with regard 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,” the bank told Fin24 in an emailed statement.
"We will engage fully with the relevant authorities in relation to this serious matter but cannot comment further while the Competition Tribunal process continues," said a Standard Bank spokesperson.
Meanwhile, the Democratic Alliance said the timing of the price-fixing case seems suspicious.
"The DA takes note of the Competition Commission's referral of the matter to the Tribunal and will wait for the law to take its course," said DA MP and shadow Minister of Economic Development Michael Cardo.
"But the timing of the announcement does seem a little suspicious, coming hot on the heels of [President Jacob] Zuma's State of the Nation Address (SONA), in which he made it clear that the competition authorities would be used as one of the main tools of 'radical economic transformation' going forward," he said.
When delivering his SONA, Zuma acknowledged that South Africa’s competition authorities have done excellent work to uncover cartels and punish them for breaking the law.
“Last year I signed into law a provision to criminalise cartels and collusion and it came into effect on 1 May. It carries jail sentences of up to ten years. We are now stepping up our actions to deal with the other challenges, namely economic concentration.
“In this way we seek to open up the economy to new players giving black South Africans opportunities and make it more dynamic, competitive and inclusive. This is our vision of radical economic transformation," he said.
Last week Zuma also blamed South Africa’s top four banks for controlling the economy.
“If you have got four banks - major ones - and they take everything; they don’t want you to do anything,” he said on SABC’s Morning Live, which is sponsored by Gupta-owned newspaper, The New Age.
Zuma said banks often treated poor black people unfairly due to their lack of collateral. “The time has come: we should be able to deal with the economy at a fair level,” he said.