The South African Competition Commission (CompCom) is recommending the prosecution of several local and international banks for rigging the price of South African currency, the rand, in order to sway the market.
In a statement dated February 15, 2017, CompCom is requesting the country’s Competition Tribunal prosecute 17 banks, among them Barclays, JP Morgan, Standard Chartered Bank, and HSBC.
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The commission accuses the banks of colluding by using online chat rooms to fix prices and offers with the aim of influencing the market.
“The Commission found that from at least 2007, the respondents 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,” CompCom wrote.
“Further, the Commission found that the respondents manipulated the price of bids and offers through agreements to refrain from trading and creating fictitious bids and offers at particular times.”
The competition watchdog also reveals that the banks assisted one another to achieve the desired prices by agreeing on trading times.
In the letter to the tribunal, CompCom recommends that the involved banks be declared guilty of contravening the Competition Act and be charged an administrative penalty of 10 percent of their annual turnover.
The commission has been investigating allegations of price fixing and market allocation in the trading of foreign currency pairs involving the rand since April 2015.
Promise of Cooperation
Some of the banks mentioned in the report have already promised to cooperate with authorities, reports the BBC.
The South African government has welcomed the report, with President Jacob Zuma insisting that his government is prepared to take decisive actions against the distortion of financial markets to protect the country’s economy.
When speaking in parliament, President Zuma reiterated his government’s commitment to establishing a state bank and welcoming new players to help diversify the financial sector.
The South African opposition party Economic Freedom Fighters has also asked the government to ensure operating licenses of all the banks mentioned are revoked immediately.
In the wake of the current economic crisis in South Africa, the rand has almost halved in value against the US dollar over the last five years, with experts predicting a further drop in value in the foreseeable future.
In January, market analysts at HSBC said the South African rand was expected to weaken in the first half of 2017 due to many local and foreign factors, including the broader strengthening of the US dollar.
The analysts also cited a widening income deficit as another major factor in the overall poor performance of the rand.