Banks guilty of price fixing face fines in the tens of billions‚ but will probably pay far less‚ say experts

Standard Bank could have to pay tens of billions of rands for its traders allegedly fixing the price they bought and sold rand at.

But legal and financial experts believe that the chances of banks accused of price fixing actually having to pay such huge fines are unlikely even if they are even found guilty of colluding on the price of rand.

The Competition Commission on Wednesday asked the tribunal that 15 banks pay 10% of their annual turnover for all the years that traders allegedly colluded on price they sold and bought rand for.

Its investigation started in April 2015 and goes back to 2007. Absa is exempt from a fine because it has co-operated with the commission with reports that one of its staff was the whistle-blower.

If there was any possibility of a real fine the banks share price would be plummeting but the prices have barely changed since the announcement‚ said Intellidex analyst Stuart Theobald.

This is because the market is not expecting such large fines to be paid‚ he said.

It could be a very difficult case to prosecute he said as the trades took place offshore‚ according to the Competition Commission.

Lawyers confirmed to the Times that the Competition Act gives authorities jurisdiction over activities that take place or have an economic effect in South Africa.

Mitch Morrison‚ director at Fullard Meyer said this means banks that are not in the country may be able to blow off regulators. Some of banks cited do not have a physical presence in South Africa.

“Even South African banks may be able to use the fact trades took place offshore as a defence‚” he said. Wits University Associate Professor of Competition Law Kasturi Wits Associate Moodaliyar said that as long as the conduct has an economic effect in South Africa‚ the competition authorities will have jurisdiction over those companies. But a real economic effect of the trades could be hard to prove.

JustOneLap Trader Simon Brown said it sounds like traders colluded to increase or lower the price that rand was sold at for single trades but it would not have had long term effects on the rand’s value. As traders trade currency to four decimal points of the rand and trade in millions of dollars they can manipulae the price of currency by changing it from 13. 0410 to 13 0400 without changing the overall price.

Theobald agrees.” It looks like it was only the gap between what banks buy and sell currency at that was manipulated. This is how banks make their money in forex. You buy for less than you sell for‚ and that spread is your profit. This doesn’t affect what the actual rate is.”

Local banks cited in the case‚ Investec and Standard Bank may also settle with a negotiated fine to avoid a long drawn out prosecution if trends are usually to go by.

Director of Competition Law at Clifford Dekker Hofmeyr‚ Lara Granville said that in recent cartel cases‚ accused usually settle with a fine.

“There have been relatively few cartel cases actually litigated before the Competition Tribunal and where the targets of these investigations have been found to have contravened the cartel provisions after full contested litigation. On the other hand‚ there are many instances where parties have settled cases and admitted to engaging in cartel activity in the settlement agreements (such as in the construction case).”

Moodaliyar: “I do think in this particular case banks will settle to get rid of this quickly as possible as the allegations impact the brand.”

Morrison said the tribunal often lowers the fines requested by the commission.

Speaking in parliament yesterday‚ President Jacob Zuma said that banks had a case to answer at the competition tribunal. — Tiso Black Star Group Digital

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