The Competition Commission said it found that more than a dozen international and local banks colluded to manipulate foreign-currency trades and recommended some of them be fined 10% of their annual turnover.
The Competition Commission identified lenders, including Bank of America Merrill Lynch, JPMorgan, BNP Paribas, Credit Suisse Group, HSBC Holdings and Nomura Holdings as having participated in price-fixing and market allocation in the trading of foreign currency pairs involving the rand since at least 2007. It referred the case to an antitrust tribunal, concluding an investigation that began in 2015.
“The respondents manipulated the price of bids and offers through agreements to refrain from trading and creating fictitious bids and offers at particular times,” the commission said in a statement on Wednesday. “They assisted each other to reach the desired prices by co-ordinating trading times. They also created fictitious bids and offers, distorting demand and supply in order to achieve their profit motives.”
The outcome of the investigation comes as the government steps up pressure to break the dominance of South Africa’s largest banks and improve access to the economy.
“We need to establish if it’s a rogue trader or if this more widespread,” said Patrice Rassou, head of equities at Sanlam Investment Management in Cape Town. “This could result in fines but the Reserve Bank will ensure that it doesn’t cause disruption in our capital markets.”
Bank of America, JPMorgan, Standard Chartered Plc, Commerzbank AG, Macquarie Group Ltd, Australia & New Zealand Banking Corp, Standard Bank Group Ltd, HSBC and BNP declined to comment.
Investec Plc said it would co-operate with authorities but was unable to comment further because it didn’t have details of their investigations. Barclays Africa Group also said it would co-operate with the authorities, but noted that the regulator had not sought penalties against it. Credit Suisse said it is looking into the matter.
The Reserve Bank said it viewed the allegations as a serious matter and would allow proceedings to run their course. The tribunal will now notify the banks of the complaint and ask them to respond, Chantelle Benjamin, a spokesperson for the tribunal. The banks will then file statements and attend a preliminary meeting to set a date for a full hearing, she added.
The commission has previously uncovered collusion in the country’s bread and flour industry, among cement producers and by construction companies that bid to build stadiums for the 2010 soccer World Cup. Those involved had to pay hefty fines.
“Collusive practices must lead to consequences such as termination of the services of key management, executive and non-executive directors,” said Asief Mohamed, chief investment officer at Aeon Investment Management. “The banks, if guilty, will most likely be fined and will have a negative impact on earnings and reputation.”