Business Money

South Africa probes global banks for FX price fixing

By TJ Strydom

JOHANNESBURG (Reuters) – South Africa is investigating several global banks for allegedly fixing foreign exchange trades, joining a worldwide push to probe allegations of price-rigging in currency markets.

Photo illustration of South African bank notes displayed next to the American dollar notes in Johannesburg
South African bank notes featuring images of former South African President Nelson Mandela (R) are displayed next to the American dollar notes in this photo illustration in Johannesburg August 13 2014. REUTERS/Siphiwe Sibeko

The banks being investigated are BNP Paribas, Citigroup, Barclays, JP Morgan, Investec, Standard Bank and Standard Chartered, the Competition Commission said on Tuesday.

The investigation is focusing on trading in currency pairs involving the rand, whose daily value of trades ranges between 10 billion rand and 15 billion rand ($840 million to $1.26 billion).

While similar foreign exchange price-fixing probes are underway in Europe, Asia and the United States, this is the first time regulators have investigated banks’ trading in the South African currency.

The watchdog accused dealers at the banks of colluding, using electronic chat rooms and instant messaging, to coordinate their trading activities when giving quotes to customers who buy or sell currencies.

This coordination has the effect of eliminating competition among the respondents, as it enabled them to charge an agreed price for a specific amount of currency, the Commission said.

Barclays Africa Group, the South African unit of Barclays Plc, Standard Chartered and Investec said they would co-operate fully with the investigation.

JP Morgan, which paid nearly $100 million to settle a similar case in the United States, declined to comment, as did BNP Paribas. Standard Bank said it could not immediately comment, while Citigroup did not immediately respond to an emailed request for comment.

South Africa’s financial markets are highly liquid, making it easy for assets to flow in and out of the country during episodes of volatility.

The rand is also highly vulnerable to downturns in investor risk appetite because of South Africa’s national budget and current account deficits.

Last year, regulators in the United States, Britain and Switzerland fined six major banks a total of $4.3 billion for failing to stop traders from trying to manipulate the foreign exchange market.

The global inquiry has shaken the industry, with dozens of top dealers put on leave or fired and banks under pressure to improve their supervision of traders.

($1 = 11.9055 rand)

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South Africa probes global banks for FX price fixing