Standard Chartered has become another commercial bank that admitted wrongdoing and agreed to pay a penalty to the Competition Commission for its role in conspiring to rig trades involving the US dollar-South African rand currency pair.

The Competition Commission announced on Wednesday 15 November that it has entered into a settlement agreement with Standard Chartered, which “admitted liability” and agreed to pay an administrative penalty of R42.7-million. 

A spokesperson for the commission later told Daily Maverick that Standard Chartered also admitted wrongdoing to charges relating to the manipulation of currency trades including the rand — ending a long-running dispute with South Africa’s competition regulator. 

In 2019, Standard Chartered entered into a similar settlement agreement with US authorities, admitting to wrongdoing relating to the manipulation of currency prices and paying a fine of $40-million (R536-million at the time). 

Competition lawyers viewed Standard Chartered’s settlement with US authorities as a boost to the commission’s case as it would be difficult for the bank to fight currency manipulation charges after admitting wrongdoing in another jurisdiction. 

The case against banks 

Bank traders at 28 local and international banks are accused by the commission of entering into a general agreement or “single overarching conspiracy” to collude on prices for bids, offers and bid-offer spreads for spot trades in relation to currency trading from 2007 to 2013. In doing so, they allegedly used platforms such as the Reuters currency trading platform and the Bloomberg instant messaging system (chat room), as well as telephone conversations and meetings, to coordinate their alleged collusive trading activities. 

The commission launched its case in 2017, charging the banks, among them Standard Bank of SA, Investec Bank, Bank of America, Merrill Lynch International, JP Morgan Chase, HSBC Bank, and Credit Suisse Group.

In South Africa, Standard Chartered is the second bank to enter into a settlement agreement with the commission, which is pushing for the 28 banks to be slapped with a 10% fine on their annual turnover or for them to settle with it. Citibank paid an administrative penalty of R69.5-million in March 2017, while Barclays plc, Barclays Capital, and Absa cooperated with the commission to be granted leniency.

Standard Chartered’s settlement with the commission comes at a time when the currency rigging case returned to court yet again, with the matter scheduled to be heard until Thursday 16 November.  

The matter is being heard at the Competition Appeal Court, where the 28 banks are requesting that the commission show them evidence that their currency traders were part of the alleged “single overarching conspiracy” to manipulate the rand.

In March 2023, the Competition Tribunal, which acts as a court on competition and antitrust matters, ruled that it was ready to hear the merits of the commission’s case. However, the banks approached the Competition Appeal Court, arguing that they needed evidence on a series of issues before the case could begin.

Arguments of banks

Since Monday 13 November, the banks have argued that the commission is relying on broad accusations that lack hard evidence — as they have not been given clear examples of individual traders participating in alleged currency rigging. 

Banks said the commission does not have jurisdiction to bring charges as some banks are foreign entities, and that trading in the rand does not have broad consequences for the economy as traders use it to purely trade in other currencies. 

They have also charged that it is hard for a few currency traders to cause big shifts in the exchange rate movements against the US dollar. Currency trading (beyond trades in the dollar-rand exchange rate) is a large market — with more than $6-trillion traded daily, making it almost impossible to cause big shifts in an exchange rate, even with a coordinated strategy to rig currency markets by traders. 

The rand-dollar currency pair, specifically, trades about $50-billion every day, and the actions of a few currency traders are unlikely to lead to large or long-term shifts in the rand’s value, the banks have argued.

Rather, traders of currencies at a bank level would feel the pain of slight movements in the exchange rate — influenced by rogue traders. Banks help customers exchange currencies of various countries. Slight movements in the dollar-rand exchange rate would allow banks to grow the “spread”, which is the gap between the “bid” (the price banks buy any currency at) and the “offer” (the price at which they sell currencies). 

A bank usually sits between people or clients who usually need to convert dollars into rands and another client who needs to convert rands to dollars. For example, South Africa-based mining houses usually need to convert dollar-based commodities they produce into rands during the sales process of such commodities. Mining houses usually approach banks for this function.

A bank currency trader might offer to buy dollars from the mining house at R18,205 per dollar. But this would usually be at an inflated price (following the currency rigging scenarios) as normal market forces would pitch the rand at R18,105 per dollar. The difference between the two the pricing (nearly one cent) could run into thousands or millions of dollars for the mining house. DM