The recent ruling by the Competition Appeal Court (CAC) dismissing the case against the majority of the 28 banks accused of colluding to manipulate the rand highlights an alarming lack of transparency within the banking sector and raises serious concerns about the efficacy of regulatory oversights.
This is according to CEO of Future Forex Harry Scherzer, who was reacting to the CAC’s decision to dismiss the Competition Commission’s rand manipulation case against the majority of banks – both local and international - that are accused of rigged trades involving the rand/dollar pair.
The commission’s eight-year-long case was against all but four banks mentioned in the original investigation. The cases were dismissed on the grounds of a lack of evidence, a lack of jurisdiction, and overreach.
Scherzer said he was highly concerned to see the likes of FNB, Standard Bank, and Nedbank being let off the hook due to a lack of direct evidence when Standard Charter had already been fined for their wrongdoing, and many other international and local banks were still being questioned.
MMarket manipulation of this scale is likely to involve most, if not all, of South Africa's major banks, so it feels like a real let-off, and it's likely due to the size of the legal teams of these banks. The public deserves transparency and confidence in the financial system, and decisions like these erode the trust that citizens place in the banking system as well as the regulatory bodies that govern them,“ he said.
Meanwhile, the Competition Commission said it noted the judgment by the CAC handed down on Monday, January 8, 2024, following appeals, review and dismissal applications brought by 23 of the respondent banks against the decision of the Competition Tribunal dated March 30, 2023.
“In its judgment, the CAC dismissed the appeals of four of the 23 respondent banks. The CAC ordered them to file their answering affidavits in response to allegations of price fixing and division of markets in contravention of section 4(1)(b) of the Competition Act with the Tribunal within 40 days of the order.
“The CAC also upheld the appeals by 19 respondent banks. The Commission is currently considering the judgment and consulting its legal team before deciding on the next course of action,” it said.
The commission said the judgment by the CAC was as a result of appeals, reviews and dismissal applications filed by Bank of America Merril Lynch International Designated Activity Company; BNP Paribas; JP Morgan Chase and Co.; JP Morgan Chase Bank N.A.; Australia and New Zealand Banking Group Limited; Standard New York Securities INC.; Standard Bank of South Africa Limited; Nomura International PLC; Standard Chartered Bank; Credit Suisse Group; Commerz Bank AG; Macquarie Bank Limited; HSBC Bank PLC; HSBC Bank USA, National Association INC.; Merril Lynch Pierce Fenner and Smith INC.; Bank of America, N.A.; Credit Suisse Securities (USA) LLC; Nedbank Group Limited; Nedbank Limited; FirstRand Limited; FirstRand Bank Limited; and Standard Americas INC.
In February 2015, the Competition Commission referred several banks to the Competition Tribunal for price fixing involving the rand. The commission investigated 28 banks, in what it called the “Forex Cartel” case.
The commission alleged that the manipulation influenced the exchange rate of the South African rand, which affected various parts of the South African economy.
At the time, political parties said if the banks were found to be manipulating the rand, they should be investigated, and fines should be imposed.
The SACP vowed to deepen its efforts for individuals directly involved in manipulating our currency’s pair or exchange rate with other currencies to be held personally liable.
“They should face corruption charges and prison sentences. The fines imposed on culpable banks should be raised beyond 10% of their annual income, and additional legislative measures must be adopted against them to clamp down on currency manipulation,” it said.
The National Freedom Party (NFP) expressed its deep concern over the recent revelations regarding the manipulation of the Rand by South African and international banks.
"The reported actions by these financial institutions have raised serious questions about the stability of our economy, the welfare of South African workers, and the integrity of our financial systems," it said.
NFP leader in Parliament Ahmed Munzoor Shaik Emam said: “We vehemently condemn any attempts at destabilising our economy or orchestrating regime change through unethical financial practices. The manipulation of the Rand by major banks should be a matter of utmost concern for the nation as a whole.
“The severe impact that this manipulation has had on South African workers, businesses, and the overall economy is deeply concerning and should have major legal and criminal consequences. The burden carried by the workforce due to the manipulation of the Rand, resulting in retrenchments, reduced salaries, and economic instability, is unacceptable and deplorable.”
He added that the NFP calls for a thorough commission inquiry to investigate the extent of this manipulation, its ramifications on the economy, and the involvement of various banks.
“The NFP demands accountability from both the banks involved and the regulatory bodies responsible for oversight. There must be a transparent and stringent regulatory framework to prevent such manipulations in the future and ensure the protection of our economy and citizens,” said Shaik Emam.
He said in light of the far-reaching impact of this manipulation, the NFP called for a comprehensive criminal investigation into these egregious actions.
“The erosion of capital reserves, profitability margins, and potential impact on various sectors demand immediate scrutiny and accountability. The NFP reiterates its call for a commission of inquiry, to ensure that those responsible face the full force of the law,” he said.