Cape Town - The institutions implicated in collusion and price fixing came under fire on Thursday, with President Jacob Zuma calling for strong action against 17 major banks.
Economists warned the investigation would not have a serious impact on the economy, but would lead to huge fines being imposed.
The National Treasury also expressed concern at the conduct of the banks following a similar scandal in the US and UK.
Political parties, the Banking Association of SA and analysts agreed that action needed to be taken after the Competition Commission uncovered currency manipulation.
Zuma told the joint sitting of Parliament during his reply to the State of the Nation address debate that the banks could not be a law unto themselves.
“On Wednesday the Competition Commission announced that it has concluded an investigation into price fixing and market allocation in the trading of foreign currency involving the rand, covering the period from 2007, and found that some banks have a case to answer,” said Zuma.
“This matter is still under investigation. As stated in the State of the Nation address, the government is prepared to act against market abuse, price-fixing and collusion in the private sector to protect our country’s economy.”
In his address last Thursday, Zuma said the new law in jailing people involved in collusion came into effect in May last year.
He said the prison sentence was stiff, and those found guilty could serve up to 10 years in prison.
“We view this matter in a very serious light and welcome any steps taken against wrongdoing by any financial institutions, and will respect whatever outcome of this process at the Competition Tribunal,” said the Treasury.
Greed
“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 the 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.”
Chief economist at Efficient Group Dawie Roodt said this would not have a serious impact on the economy.
“Over the years there were many international banks caught out doing wrong things, including fixing interest rates,” he said.
This was in reference to the combined fine of $6 billion imposed on banks in the UK and the US for collusion in 2015. He said the issue was not collusion, but problems in the market. Cosatu said reaction was similar to that for seven companies in the construction and steel sectors, which undertook to pay a R1.5bn fine to the State for colluding over tendering processes during projects for the 2010 Fifa World Cup.
“All the construction companies needed to do was tell the government that they were prepared to contribute R1.5bn for development projects and committed to promote transformation and black participation and ownership in the sector, and they were free to move on with their businesses,” it said.
Cosatu said: “All these politi-
cal parties are part of the legislative arm of the state, they should have acted long ago to pass strict laws that would deal decisively with this collusion phenomenon if they were
serious.
Absa, Investec and Standard Bank are three local banks that were implicated in the investigation. The others are in the US and Europe.
The SACP also condemned the conduct of the banks, saying strong action was needed.
It said the 10 percent fine of the banks’ annual turnover sought by the Competition Commission was next to nothing compared to what they had done.
The Banking Association of SA also called for action against those implicated. Association managing director Cas Coovadia said the law must take its course and the banks would have to abide by the decisions taken by the competition authorities.