South Africa’s big banks to face the music for rand manipulation

[Nat Quinn]

The Competition Tribunal has dismissed applications and objections brought by various local and foreign banks to escape prosecution in an ongoing case investigating alleged currency manipulation.

In February 2017, the Competition Commission referred a number of banks – including Investec, Standard Bank and Absa – to the Competition Tribunal for price fixing involving the rand.

The commission ultimately brought 28 banks under investigation – including Nedbank and FirstRand – in what it is calling the “Forex Cartel” case.

The commission found that from at least 2007, the banks had a general agreement to collude on prices for bids, offers and bid-offer spreads for the spot trades in relation to currency trading involving the rand/dollar currency pair.

The manipulation impacted the exchange rate of the South African Rand, which in turn affected various parts of the South African economy, including imports and exports, foreign direct investment, public and private debt, and company balance sheets, with the attendant implications for the price of goods and services and financial assets.

All the banks named in the findings lodged some objection or application against the commission – some contending that the commission lacked jurisdiction, and others filing various exceptions, objections, applications for dismissal and strikeouts.

In the judgment handed down on Thursday (30 March), the Competition Tribunal dismissed all the various applications/objections brought by 15 banks, including Standard Bank, Nedbank, and FirstRand Bank, to stop prosecutions against them for fixing the South African Rand/US Dollar currency pair.

The Tribunal also dismissed a second round of applications brought by the various banks, in response to the commission’s amended complaint referral. The Tribunal further ruled that it has jurisdiction to hear the case against the banks.

The Competition Commission welcomed the ruling.

“Yesterday’s ruling is the second major setback for the banks in about a week after the Competition Appeal Court (CAC) ruled in favour of the commission by denying Standard Bank access to the Commission’s evidence,” it said.

The CAC ruled that Standard Bank can have access to the commission’s evidence only after it has answered the allegations against it.

As part of its reasons for the decision, the Tribunal stated that: “The respondents are accused of engaging in conduct considered the most egregious in competition law. Furthermore, the alleged conduct relates to fixing and manipulating the Rand/Dollar exchange rate, which has a central and crucial role in the South African economy.”

The Tribunal ordered that all the banks must respond to the complaint referral by filing answering affidavits – in the main matter dealing with the merits of the case – within 40 business days of the Tribunal’s order.

The Tribunal further ordered that if any of the banks still have an objection to the complaint referral, they should raise those objections as part of their answer(s) to the complaint referral and if the Commission wishes to reply, it must do so within 20 business days of the banks filing their answering affidavits.

“The decision by the Tribunal affirms the commission’s view that there is collusion that the banks must answer to. The prosecution of this matter has been going on since 2017, and the banks have not answered the allegations against them.

“This decision provides the banks with an opportunity to do so,” said Competition Commissioner Doris Tshepe.

The full Tribunal ruling can be read below:

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