London - Citigroup and Barclays won’t be targeted for
fines by South African antitrust authorities for colluding to manipulate the
value of the rand because they co-operated with regulators, three people
familiar with the matter said.
While they may not yet have full indemnity, their
disclosures to the Competition Commission could save them from being penalized
if the information they provided is proven correct, the people said, asking not
to be identified because the matter is still confidential. The two banks have
been working with the commission from an early stage, they said.
Citigroup and Barclays were named as part of the
rand-rigging probe that started in 2015. The Competition Commission on Wednesday
didn’t name Citigroup and didn’t add Barclays to the list of banks it
recommended for fines. The commission identified lenders including Bank of
America Merrill Lynch, HSBC Holdings, BNP Paribas, Credit Suisse Group,
JPMorgan Chase & Co and Nomura Holdings as among those that participated in
price fixing and market allocation in the trading of foreign-currency pairs
involving the rand. It referred the case to an antitrust tribunal.
Traders in New York and Johannesburg used the Reuters
trading platform and Bloomberg chat-rooms to conspire to rig the rand’s rate,
prosecutors will allege, according to one of the people. While the regulator
will seek the maximum fines, banks that have cooperated are likely to be
granted leniency, the person said.
Fictitious bids
“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 Pretoria, South Africa-based commission said
in an e-mailed statement Wednesday. “They assisted each other to reach the
desired prices by coordinating trading times. They also created fictitious bids
and offers, distorting demand and supply in order to achieve their profit
motives.”
The prosecution should be shorter than most antitrust
cases, due to the straightforward nature of the matter, one of the people said.
Regulators aren’t seeking specific action against individual traders from the
banks, but are likely to make demands to change incentives that encourage
traders to push the boundaries, the same person said.
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Other lenders named in the probe include
Johannesburg-based Standard Bank Group, Investec, which has units in South
Africa and the UK, Standard Chartered, Commerzbank, Macquarie Group and
Australia & New Zealand Banking Group.
South African President Jacob Zuma called for action
against market abuse, while the National Treasury said reckless behaviour must
be “punished and brought to an end.”
‘Unbridled greed’
“If proven to be true, it would confirm the pervasiveness
of unbridled greed within the ranks of the forex trading sections of banks,”
the Treasury said in an e-mailed statement.
Barclays Africa, about 50 percent owned by Barclays, said
in an e-mailed statement on Wednesday it has cooperated with the commission and
will continue to do so. Citigroup declined to comment in an e-mail on why it
wasn’t on the list of banks facing a fine. London-based Barclays declined to
comment.
The commission recommended the banks be fined 10 percent
of their turnover, the maximum allowed.
BLOOMBERG