This comes after the Competition Commission on Wednesday referred a collusion case to the Competition Tribunal for prosecution following the completion of an investigation into price fixing and market allocation by 17 banks, including three South African banks.
The Commission said it found that from at least 2007, the banks had a general agreement to collude on prices for bids, offers and bid-offer spreads for the spot trades in relation to currency trading involving US Dollar/Rand currency pair.
At the tribunal, the matter has now entered a new phase in which the banks would have an opportunity to answer for themselves.
Treasury said in a statement that this process must be allowed to run its course without fear, prejudice or undue influence.
"We view this matter in a very serious light and welcome any steps taken against wrong-doing by any financial institutions, and will respect whatever outcome of this process at the Competition Tribunal," Treasury said.
"If proven to be true, it would confirm the pervasiveness of unbridled greed within the ranks of the forex trading sections of banks even after evidence that such behaviour has potential to collapse national and global financial systems and bring about immeasurable pain to ordinary people as evidenced by the deep recession of 2008-09 which was triggered by banks conducting their business recklessly. This has to be punished and brought to an end."
Treasury said the allegations, if proved to be correct, pointed to poor market conduct practices at such offending institutions. It said this was precisely the type of abuse it had in mind in 2011 when proposing the coming Twin Peaks reform.
The Twin Peaks reform is aimed at putting in place a new market conduct regulator to ensure that all financial institutions treat their customers fairly and operate with the highest ethical standards.
Treasury said the Twin Peaks would create a dedicated market conduct regulator with scope of responsibility across the financial sector, to cover market conduct issues, in both the retail and wholesale market.
"It should be noted that the South African Reserve Bank is a prudential banking supervisor, and not a market conduct regulator, and that no market conduct supervision was in place during the period in question in 2007 and after for the period that the Competition Commission alleges such misconduct," Treasury said.
"These abusive market conduct practices highlighted the problems caused by the light-touch regulatory regime that characterized the financial sector before 2008."
Since the crisis, regulators around the world have radically shifted their regulatory paradigm and embarked on a more intensive, intrusive and effective regulatory framework to regulate the financial sector, given risks they pose to the economy.
These are the reforms outlined in the Financial Sector Regulation Bill that is currently before the National Council of Provinces in Parliament, having been already passed by the National Assembly.
"These regulators will support the achievement of proper competition outcomes in the sector," Treasury said.
Treasury said it would ensure that it, and all financial sector regulators, support the Competition Commission in any way possible should it request such assistance.