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Screenshot of a breaking news alert e-mail from Q2 2017
It was three weeks ago when the financial community learned that The Competition Commission of South Africa had officially announced they initiated a Forex manipulation investigation against a number of banks operating within South Africa including: BNP Paribas, Citigroup, Barclays, JP Morgan, Investec Ltd, Standard New York Securities Inc. and Standard Chartered Bank. A number of regulators and global banks operating within the UK and U.S started to announce settlements in the year long FX manipulation investigations that spanned from financial centers from Australia to Europe. Evidence must have been to hard to ignore as South Africa regulators joined the FX probe alleging price fixing and colluding involving South African rand exchange rates.
Specifically, The Competition Commission has accused dealers at banks of colluding by using an electronic messaging chat room called “ZAR Domination”, to coordinate their trading activities when giving quotes to customers who buy or sell currencies with the rand. ZAR is the South African currency code used in financial markets.
“We are at an advanced stage and we are quite comfortable and confident what we can back up our case,” the head of the Commission, Tembinkosi Bonakele, told Reuters in an interview.
So how big could the fines be?
“It’s a big investigation involving massive amounts of turnover and if you just have a look at our guidelines, you can’t escape the conclusion that these are going to be fairly significant fines. They would be among the highest fines handed by the Commission.” Bonakele said.
Interestingly, under South African law, companies can be fined a maximum of 10 percent of the turnover of a division in which the anti-competitive conduct occurred. The South African rand has turnover that averages between 10 billion and 15 bln rand ($840 million to $1.3 bln) a day. Thus, we could be seeing fines upwards of $100 million or more per bank, and there are seven banks involved.
As previously mentioned, this is the first time regulators have investigated banks’ trading in South Africa.
Barclays Africa, Standard Chartered and Investec have said they would co-operate with the investigation. According to Reuters the other banks had either previously declined to comment or their officials were not available to comment.
This is the latest update we have now in this particular story as Mr. Bonakele declined to say when the case would exactly be filed with the Competition Tribunal, which settles on the Commission’s findings.
To see the Reuters report, click here.