Standard Chartered throws other banks under the bus
The settlement ends eight years of litigation between the British multinational bank and South African competition authorities, though it may have serious implications for other lenders charged with being part of an overarching conspiracy to manipulate the rand.
The settlement was confirmed as an order of the Competition Tribunal following a hearing on Wednesday afternoon during which the authority sought clarity on various clauses contained in the agreement with Standard Chartered.
"Standard Chartered has undertaken to cooperate in the prosecution of the other respondent banks," Makgale Mohlala, head of the cartels division at the Competition Commission, said during the tribunal hearing on Wednesday afternoon.
The tribunal later issued a statement saying Standard Chartered had agreed to provide evidence, written or otherwise, that is in its possession or under its control, which will assist in the prosecution of the remaining respondent banks in the forex rigging matter.
As part of its settlement with competition authorities, Standard Chartered pledged to refrain from engaging in anti-competitive behaviour or any prohibited practice in the future.
It must also prepare and circulate a statement summarising the contents of the settlement agreement to its employees, managers and directors who have market-making responsibilities within 30 days of the agreement being confirmed, as an order of the Tribunal.
Hearings into the involvement of the other accused banks are being heard separately this week at the Competition Appeal Court (CAC) under the auspices of Judge Dennis Davis.
During those proceedings, legal representatives from respondent banks questioned the merits of the case against them, and queried whether local authorities have jurisdiction, given that much of the forex trading that impacts the rand takes place offshore.
Standard Chartered's settlement with competition authorities was premised on it admitting liability in distorting bids, offers, bid-offer spreads as well as other activities aimed at manipulating the rand-dollar exchange rate between 2007 and 2013.
It also participated in dividing markets by allocating customers in terms of which one trader withholds or pulls an existing bid or offer from the market to allow another trader to execute and complete a separate trade.
Though competition authorities said this cartel activity appeared to end in 2013, when the last of the implicated Standard Chartered traders left its employ, action against 28 local and international banks initially implicated first occurred about two years later.
The Competition Commission first lodged a complaint in April 2015 against various financial entities, including Barclays Bank, Barclays Africa Group, BNP Paribas, BNP Paribas South Africa, Citigroup, Citigroup Global Markets, JP Morgan Chase & Co, JP Morgan South Africa, Investec, Standard New York Securities and Standard Chartered Bank.
This complaint centred on allegations that the companies had been involved in a concerted effort to manipulate the rand exchange rate in violation of the Competition Act. Much of the alleged collusion is said to have occurred over instant messaging platforms on terminals leased from Bloomberg and Reuters, financial data providers that also supply live news feeds and trading systems.
In August 2016, the Competition Commission amended the complaint to add ABSA, Barclays Capital, Credit Suisse Group, Commerzbank, Bank of America Merrill Lynch, HSBC Bank, ANZ, Citibank, JP Morgan, Nomura International, Macquarie Group, and JP Morgan Chase Bank.
The amendment included allegations of market allocation, an anti-competitive practice that involves dividing up customers among participants, as well as claims the respondent banks had assisted each other by allowing a trader with a significant open risk position to complete trades before others and by manipulating market liquidity.
On 15 February 2017, the Competition Commission referred the matter to the Competition Tribunal for adjudication.
Though Citibank settled with the Competition Commission over similar allegations in April 2017, due to various legal challenges against competition authorities from other respondents, the matter has ended up in the CAC, where proceedings are ongoing.
Citibank’s involvement in manipulating the rand occurred between September 2007 and October 2013, resulting in an administrative penalty of more than R69.5 million.
US-based Citibank also agreed to fully cooperate with local competition authorities in the prosecution of the forex rigging matter. - Fin24