Citibank became the first bank implicated in a cartel that manipulated trading between the rand and the dollar to settle with the Competition Commission. 

Photo: Reuters
Johannesburg - The Competition Commission on Monday reached a settlement agreement with Citibank, the consumer banking arm of US financial services giant Citigroup, for its role in a foreign-exchange trading cartel that rocked South Africa last week.

The commission said in a statement that Citibank agreed to pay an administrative fine of R69.5 million for its role in the manipulation of the rand. The fine will have to be ratified by the Competition Tribunal.

Citibank is the first of nearly 20 local and international banks implicated in the graft probe to settle with the commission.

The fine is less than the 10 percent of the bank’s South African annual turnover that the commission said it would ask the tribunal to levy as a fine against banks that it wanted punished for collusive behaviour in the co-ordinated trading in the local and US currencies.

The agency said it sought an order that would declare that the banks were liable for the payment of an administrative penalty equal to 10 percent of their annual turnover.

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In its affidavit on Friday, the commission said it would not seek any penalties against Citibank, Absa, Barclays Capital and Barclays.

“Citibank undertook to co-operate with the commission and avail witnesses to assist the prosecution of the other banks that colluded in this matter,” the commission said.

Last week, the commission referred a collusion case to the Competition Tribunal for prosecution against Bank of America Merrill Lynch International, BNP Paribas, JP Morgan Chase & Company, JP Morgan Chase Bank, Investec, Standard New York Securities, HSBC Bank, Standard Chartered Bank, Credit Suisse Group, Standard Bank of South Africa, Commerzbank, Australia and New Zealand Banking Group, Nomura International, Macquarie Bank, Citibank, Absa Bank, Barclays Capital and Barclays Bank.

It said it had found that, for at least 10 years, the banks allegedly 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 the US dollar/rand currency pair.

“This settlement was done to encourage speedy settlement and full disclosure to strengthen the evidence for prosecution of the other banks,” the commission’s head, Thembinkosi Bonakele, said.

Shares in South Africa’s banking index continued to count losses yesterday as investors digested the competition watchdog’s recommendation that banks should be fined for rigging the rand.

The JSE’s banking index extended its losses to 1.54 percent to 7473 points by 12 noon, its lowest level since February 10, before the forex-rigging announcement. By the close, the index has recovered slightly and was 44.41 points, or 0.59 percent, lower at 7545.02.

“There is more and more concern about what has happened with these banks colluding on this rand trading that took place,” Cratos Capital equities trader Greg Davies said. “It might be investors deciding to sell their shares in case there are very big fines from the authorities.”

In the case of the alleged rigging of the rand, the antitrust watchdog said it had recommended fines amounting to 10 percent of the banks’ South African annual revenues to the Competition Tribunal, which adjudicates on the commission’s findings.

Finance Minister Pravin Gordhan’s Budget speech on Wednesday is likely to be the next likely trigger for price moves, Paul Chakaduka, a trader at Global Trader, said.

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