Angry MPs on Friday tore into banks over the currency manipulation storm, demanding maximum penalties and that licences be revoked.
But some of the local banks accused by the Competition Commission have denied any wrongdoing, saying no evidence has been brought forward that they were involved in chatrooms where the manipulation of the rand was discussed.
Speaking at hearings of the standing committee on finance, which received the report of the Competition Commission on the outcomes of the manipulation of the rand, EFF MP Floyd Shivambu said imposing an administrative fine on the accused banks not exceeding 10% of annual turnover was “a slap on the wrist”.
“Why are we opting for a lesser slap-on-the-wrist approach to those who applied for leniency? Let us go for the maximum optimal penalty, which is 10% of turnover. All other agencies and institutions should pursue these banks, particularly to recover the money which was unlawfully gained,” Shivambu said.
He insisted that the full amounts gained by implicated banks be paid back. He also called for criminal prosecutions and the revocation of banking licences.
The Competition Commission recently announced that UK-based multinational bank Standard Chartered had admitted its role in the manipulation of the rand and agreed to pay a R42.7m penalty. The agreement was the culmination of an eight-year probe by the commission into a cartel involving up to 28 local and international banks to manipulate the value of the rand.
Reacting to the commission’s report at a post-cabinet media briefing on Monday, minister in the Presidency Khumbudzo Ntshavheni blasted the private sector, claiming it was engineering the collapse of government.
“We have maintained over the period that the performance of the rand and sometimes the performance of the economy has been manipulated by the private sector, which has no interest in the development of this country, which continues to engineer … to make sure the government collapses,” Ntshavheni said in response to questions about government’s reaction to the development.
Standard Chartered admitted its role in the manipulation of the rand/dollar currency pair by fixing bids, offers, bid-offer spreads, the spot exchange rate, and the exchange rate at the Financial Information eXchange.
The commission said Standard Chartered also “participated in dividing markets by allocating customers in terms of which one trader withholds or pulls his/her existing bid or offer from the market to allow the other trader to execute and complete his/her trade”, conduct that contravenes the Competition Act.
In February, the Competition Appeal Court dismissed the banks’ appeals and asked the commission to file a new complaint referral. In March, the Competition Tribunal dismissed the banks’ application and asked them to file answers to the complaint referral. The banks’ appeal of this decision led to the November hearings.
Competition commissioner Doris Tshepe told the committee on Friday evening that while there was an impact on the currency as a result of the conduct by the accused banks, the specific details would form part of the evidence presented to the Competition Tribunal.
“Because of the volume of the forex trading that happens daily, because it is so high, and it has happened over a long period of time of at least six years, this would have exacerbated the effect … on the currency.”
Tshepe said five banks are co-operating with the commission. Barclays Bank, Barclays Capital and Absa Bank applied for leniency and declared their role. Citibank had settlement discussions with the commission in 2017; the bank admitted liability and paid a R69.5m fine.
MPs also raised their ire at Reserve Bank governor Lesetja Kganyago for not being present at the hearings.
ANC MP Noxolo Abraham said the subject could not be fully discussed without the governor’s presence and asked committee chair Joe Maswanganyi to arrange another meeting with the Bank “sooner than soon”.
This was after a representative of the central bank, Bafundi Maronoti, head of market operations and analysis in its financial markets department, said Kganyago could not attend due to post-monetary policy committee engagements.
EFF MP Mzwanele Manyi said the devaluation of the rand was sufficient grounds to proclaim the Bank had failed in its constitutional duty to preserve the currency.
“Don’t they [the Bank] think that section 15 of the Financial Sector Regulation Act is triggered by this event? Because that section talks to all issues around systemic events, which the Reserve Bank has an obligation to mitigate. Is that section not engaged in this whole furore around currency manipulation?"
Maswanganyi demanded more details on the financial impact on the currency, the economy and households.
However, in a statement released ahead of the hearings on Friday, the National Treasury sought to downplay the impact of the currency manipulation.
It said while the wrongdoing described by the Competition Tribunal harmed individual clients, it would not have influenced the depreciating trend of the currency since 2013, which was driven by broader changes in the global and domestic economy.
“The value of the currency today, which has depreciated against the dollar, and the resulting impact on prices, should not be attributed to these instances of misconduct between 2007 and 2013,” the Treasury said.
But it promised to introduce legislation next year to widen oversight of trading in over-the-counter derivatives and foreign currency.
In its complaint referral affidavit to the Competition Tribunal, the commission said banks joined a “conspiracy” to dominate the currency at various points between 2007 and 2013 in which traders would share information on bid-offer spreads, their respective trading positions and off-setting trades, and manipulate bid-offer prices.
It detailed communications between traders working at these banks through mediums including an instant messaging platform on Bloomberg terminals and the Reuters trading platform.
The affidavit mentioned Duncan Howes and Thulani Kunene, who it said represented Absa and were authorised by the bank to trade in the rand/dollar currency pair on its behalf.
“Absa had joined the conspiracy by at least January 1 2008 when Standard Bank and Absa withheld quotes to enable Nedbank to fix the exchange rate at 7.5850 (R7.58c); alternatively June 30 2008 when their employee or representative Howes was a participant in an implicated chatroom.”
It said Bryan Brownrigg and John Wood were employed by Standard Bank and were authorised by the bank to trade on its behalf in the same way.
“Standard Bank joined a conspiracy to manipulate the rand in 2008 and Standard Bank and Absa withheld quotes to enable Nedbank to fix the exchange rate at 7.5850.”
The affidavit added that Clint Fenton was employed by or represented Investec or Investec Bank and authorised by Investec to trade in the rand/dollar currency pair on its behalf.
“Investec and Investec Bank had joined the conspiracy by at least June 30 2008 when their employee or representative Fenton was a participant in an implicated chatroom.”
It said traders unknown to the commission were authorised by Nedbank Group or Nedbank Ltd to trade in the currency pair on its behalf between 2007 and 2013.
In its response, Absa said it “was the first to approach the commission under its leniency programme and has co-operated with, and will continue to co-operate with, the commission in relation to this matter. The commission is therefore not seeking an order from the tribunal to impose any fine on Absa."
The bank said it could not comment further as the matter is subject to legal proceedings.
Standard Bank said it did not manipulate the value of the rand and did not engage in any anticompetitive or criminal conduct.
“Standard Bank will continue to use every avenue provided to it in law to defend itself against these false allegations. Standard Bank is committed to behaving with complete integrity at all times,” it said.
Nedbank denied involvement in the alleged anticompetitive behaviour of fixing the rand/dollar exchange rate. In an e-mail to Business Times, it said the Competition Commission had failed to provide any evidence to support the allegations.
“There is no evidence, either from Nedbank’s own investigations or presented by the Competition Commission, of any Nedbank traders participating in any of the so-called chatroom conversations or in any conspiracy in respect of rand trading. Nedbank will continue to defend itself against these claims.”
Investec said the commission conceded, in its new referral, that neither Investec nor any other South African bank has been implicated in the reported Bloomberg chatrooms that were set up by traders at the international banks.
“To date, all of the international banks that have settled with the Competition Commission were participants in these Bloomberg chatrooms. Investec did not participate in the recent interlocutory applications and remains ready to present its case when the merits of the new referral are finally heard by the Competition Tribunal,” it said.
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