Rand manipulation: Competition Commission responds to case collapse
The Competition Commission has responded to the Competition Appeal Court (CAC) this week dismissing its rand manipulation case against the majority of banks it was targeting in the investigation.
The commission has “noted” the ruling and said it was still considering the judgement and consulting with its legal team before deciding on the next course of action.
However, the commission also stressed that having most of the appeals upheld doesn’t mean the case and investigation are over, with at least four of the banks implicated having their appeals dismissed.
“In its judgment, the CAC dismissed the appeals of four of the 23 respondent banks. The CAC ordered them to file their answering affidavits in response to allegations of price fixing and division of markets in contravention of section 4(1)(b) of the Competition Act with the Tribunal within 40 days of the order,” the commission said.
Further to this, only 23 of the 28 banks in the investigation launched appeals – the five remaining banks include those which have already admitted fault and paid a fine, Absa bank, which was not requested by the commission to submit responses, and Investec, which opted not to appeal but said it would defend itself in the investigation.
The four banks which will now have to file answering affidavits with the Competition Tribunal within 40 days include:
- BNP Paribas
- JP Morgan Chase Bank
- Credit Suisse Securities and
- HSBC Bank PLC
The Commission first launched a complaint on 1 April 2015, against various financial entities that centred on an agreement or concerted practice to manipulate prices related to certain foreign currency pairs tied to the rand.
This was in violation of Section 4(1)(b)(i) of the Act.
On 1 August 2016, the Commission amended the complaint, adding additional financial institutions and including allegations of market allocation through customer allocation against the financial institutions.
This was in violation of Section 4(1)(b)(ii) of the Act.
The anti-competitive practices are alleged to have taken place between September 2007 to at least September 2013.
Despite the case being ongoing for several years, it again shot to prominence in the latter half of 2023 when Standard Chartered – one of the banks involved – settled with the commission and agreed to pay R43 million for its part in the scandal.
Certain politicians were quick to jump on board and use the case to make wildly false claims about widespread currency manipulation amounting to “trillions of rands”, and used it as a scapegoat for failed economic policies that have kept South Africa’s economy in the doldrums for over a decade.
Ministers also used the case as an excuse to attack the private sector at large.
However, economic and banking experts – and National Treasury itself – made it clear that the manipulation and rigged trades in question were extremely isolated, and only individual clients were harmed by the activity, not South Africa as a whole.
Treasury also clarified that the market manipulation in question ended in 2013 and that rules and regulations had long been put in place to mitigate and avoid this behaviour – thus, the rand collapse and economic stagnation seen over the last ten years are unrelated.
However, what is concerning about the case, according to forex experts, is that its failure shows a major lack of transparency within the banking sector and raises concerns over the efficacy of regulatory oversights.
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