Standard Chartered Chartered has agreed to provide the Competition Commission with transcripts of online communications implicating its competitors after the British international bank agreed to pay a R42.7 million settlement for manipulating the rand exchange rate.
As many as 27 other banks were allegedly involved in the scheme that the Competition Commission says had wider implications running into trillions of rand.
The charges against the South African and international banks centred on allegations that the banks had “engaged in an agreement or concerted practice to manipulate prices related to certain foreign currency pairs” tied to the South African rand.
The respondent banks also reportedly “conspired to assist each other by allowing a trader with a significant open risk position to complete trades before others and by manipulating liquidity”, which was in violation of competition laws and “market trading” practices.
Banks implicated in the scheme also include Barclays Africa (now Absa), BNP Paribas, BNP Paribas South Africa, Citi group Inc, Investec Ltd, Citigroup and Standard New York Securities Inc among others.
The Competition Tribunal is currently holding hearings involving the respondent banks and the Competition Commission.
Standard Chartered on Wednesday admitted liability to the currency manipulation charges, and agreed to pay the settlement fine. It has also agreed to give evidence in its possession such as instant messaging transcripts between its employees and those of its competitors.
It, however, said it would not be bringing workers involved in the scheme to testify as they had now left the company.
“Standard Chartered has no means to compel employees to testify. We have access to documentary evidence in the form of transcripts of online communications.
“That evidence will be provided,” Robert Wilson, a representative of Standard Chartered told the Competition Tribunal’s hearing on Wednesday.
Citibank agreed to a settlement with the Competition Commission in 2017.
It paid an administrative penalty of R69.5m for colluding with other banks in the forex trading cartel scam.
Doris Tshepe, a commissioner with the Competition Commission, said the settlement by Standard Chartered should help encourage other respondent banks to consider settling the complaint against them.
The effect of the alleged rand manipulation by the banks is wide-spread as it affected multiple facets of the economy, including the value and significance of exports and imports as well as the payment mechanisms for these. It would also have had an impact on the value of Foreign Direct Investment flows, external debt for the public and private sector and the prices of imported goods, commodities and services.
Stellenbosch University, professor of Mercantile Law, Philip Sutherland explained that banks have desks that trade currencies.
“The trades take place on platforms. What we know as the exchange rate that is published on the news and in newspapers is normally just a snapshot.
“Take the price at which rands and dollars traded on a particular platform in the 30 seconds before 16h00 in the afternoon London time.
“These are known as fixes. Currency traders in the big banks fixed these fixes, through electronic chatrooms connected to the platforms they manipulated their trades to ensure that the fixes reflected certain exchange rates which benefited them in other trades as the fixes are often used to price transactions.”
Sutherland said the Commission has struggled with these cases because they involved many banks and it was difficult to decide who colluded with who and when.
“Many of the banks have no connection to SA and they do not do business here. The cases raised difficult procedural issues.
“Standard Chartered lost their most recent attempt to escape responsibility in a judgment that was delivered by the Tribunal on 30 March 2023,” he said.
From 2007 to 2018 Standard Chartered and its competitors were working in conspiracy to fix bids, offers and other trades through bilateral communication such as instant messaging, according to Makgakle Mohlala, divisional manager, cartels for the commission.
After complaints were lodged against banks, Standard Chartered approached the commission on 27 November 2019, offering R18m in settlement.
The commission rejected this initial offer, as well as the bank’s subsequent R34m settlement proposal in April 2020. However, the two parties have now agreed on the current R42.7m settlement amount.
“Standard Chartered and the commission propose to settle the matter with admission of liability.
Standard Chartered has undertaken to cooperate with the commission in the prosecution of other respondent banks,” said Mohlala.
He added that Standard Chartered had also “undertaken to refrain from engaging in any conduct which is prohibited” going forward.
“The impact of the currency manipulation is ultimately on the value of the rand, whether it’s stronger or weaker depends on whether you are a seller or buyer of currency on the day. The behaviour of this (nature) day has a direct impact on that (rand value) and it can affect you negatively or it can advantage you.”
General Industries Workers Union of South Africa (GIWUSA) president and Unisa professional Ethics lecturer Mametlwe Sebei added: “This conduct is unethical and criminal and must be penalised to the maximum possibility of the law. The implications extend beyond academia to impact ordinary people directly. The devastating cost of living crisis for ordinary people comes with the economy becoming more and more dependent on imports whose prices vary in terms of the exchange rate.”