The South African Reserve Bank (SARB) has welcomed Wednesday’s decision by the Competition Commission to refer local and foreign owned banks to the Competition Tribunal for price fixing.

Standard Bank‚ Investec‚ Absa Bank and many foreign owned banks were referred to the tribunal‚ after they were accused by the Competition Commission of manipulating the price of the rand when selling and buying dollars.

This was allegedly done through making fictitious orders to buy and sell rands to change the supply of currency. The banks were also accused of using trading chat rooms to coordinate times for the sale of rands or to stop selling for a time in order to manipulate prices from 2007.

In a statement released by the Reserve Bank late on Wednesday afternoon‚ it said it regarded the allegations in a “serious light“.

“The investigation 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 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‚” it said.

According to the reserve bank‚ the rand is a globally traded currency with 30.0% of its daily turnover taking place in South Africa‚ while turnover with non-residents accounts for 57.5% of domestic turnover.

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 authorized 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 statement said.

“The objective of the review was to establish whether there was any misconduct or malpractice in the South African 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. A number of these recommendations are currently being implemented‚” the statement said.

Of the three South African banks in the spotlight‚ it appears Absa may escape prosecution and fines because of its co-operation with the Commission.

While neither Standard Bank nor Investec had responded to the announcement by Wednesday evening‚ Absa issued a brief comment saying that it would “continue to co-operate with the Commission during the prosecution of this matter. It should be noted that the Competition Commission has not sought any penalties against Absa“.

 — TMG Digital