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Forex collusion case back in the spotlight at Competition Tribunal

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The Competition Tribunal will on Wednesday release an order with reasons on various pre-trial applications brought from several banks in the forex collusion case.

The matter dates back to 2017 when the Competition Commission referred a collusion case involving 17 banks to the Tribunal. The commission, since April 2015, had investigated price fixing and market allocation in the trading of foreign currency pairs involving the rand. Three domestic banks – Absa, Standard Bank and Investec were among those named, Fin24 previously reported.

The other 14 banks are Bank of America Merrill Lynch International, BNP Paribas, JP Morgan Chase & Co, JP Morgan Chase Bank, Standard New York Securities, HSBC Bank, Standard Chartered Bank, Credit Suisse Group, Commerzbank, Australia and New Zealand Banking Group, Nomura International, Macquarie Bank, Citibank, Barclays Capital and Barclays Bank.

At the time the commission said it 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.

Citibank had agreed to pay a R69.5m fine, while Absa – which apologised for its involvement and agreed to help the regulator with its investigation – was not fined, Bloomberg previously reported.

Earlier this year, before a New York authority, Standard Chartered had pleaded guilty to manipulating currencies between 2007 and 2013.

The bank had reached a consent agreement with the New York State Department of Financial Services to pay $40m (about R530m), Fin24 reported.

Locally, litigation against banks has been ongoing since 2017 but a date has not been set for the main hearing before the Tribunal.

Competition Commissioner Tembinkosi Bonakele has previously criticised banks for bringing exception applications ahead of the case as an effort to wear down the commission, City Press previously reported.

Various banks have raised different issues in their pre-trial applications, a spokesperson from the Tribunal confirmed. The Tribunal’s order will not be the outcome of the main trial. Fin24 understands that the pre-trial order will settle any legal issues before the main trial is heard. 

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Risk-off environment exposes SA’s weak fundamentals

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The global risk-off environment, brought about by fears of a US recession, has further exacerbated South Africa’s economic woes. “When the tide goes out, you tend to see which countries are exposed in terms of weak fundamentals,” says Annabel Bishop, Investec Chief Economist.

 

In this Investec Focus radio podcast, Investec Chief Economist Annabel Bishop discusses local and international concerns affecting the South African economy.

 

Annabel Bishop on rand volatility

“Typically, you do see quite a bit of volatility in the domestic currency in the middle two quarters of the year. In the Northern Hemisphere summer period, we tend to see heightened sensitivity to global market events.

“So if you have a risk-off event like the recent escalation of trade war tensions between China and the United States and concerns that the FOMC might not cut interest rates as much as previously was expected – those concerns were exacerbated in terms of the market impact and that’s quite typical for this time of the year. This given that trading conditions are fairly thin as the bulk of market traders in the Northern Hemisphere do tend to go away on their summer vacations now.”

Read Annabel’s Rand Note.

On underlying fundamentals for SA currency and markets remaining weak

“When the tide goes out, you tend to see which countries are really exposed in terms of weak fundamentals and of course with the global financial markets seeing a risk-off period, essentially the tide flowing out, then you see some of South Africa’s worries really being exposed, particularly in the run-up to the medium-term budget policy statement.

“That mini-budget we get, halfway through the fiscal year, gives us an update on government finances and of course the great worry around Eskom and its financing – what’s the quantum of debt that’s going to likely be transferred to the South African government balance sheet?”

On the proposed Debt Relief Law

“The worry [with the new Debt Relief bill] for the banking system is that such write-offs can have a significant impact on the banks’ books themselves. Conversely, this comes at a time where debt forgiveness could see some increase in borrowing.”

On an IMF bailout

“The IMF has said that South Africa is not, at the moment, in a situation which would require IMF rescue, which only happens when you go into a balance of payments crisis, so if we were unable to make payments on our government debt, particularly hard currency and foreign payments. South Africa is not deemed to be in that territory at the moment.”

On Brexit’s impact on SA

“There’s been a lot of increased relationships with South Africa in terms of trade. The UK is looking to foster deeper trade relationships and business ties with SA. If we do see a hard Brexit, strong breakaway from the EU for the UK, it will look to foster trade relationships and deals with other countries.”

On a potential US recession

“We have seen concern that the United States might not cut interest rates by as much as needed in the face of what could be a weakening in US economic growth and global economic slowdown.

“If we do see a situation where it looks like the United States will really go into a recession then I don’t think the Fed would hesitate in terms of cutting interest rates. But at the moment the US economy is deemed to be doing fairly well and I think there’s a friction between what the markets expect and what’s been communicated by the FOMC.”

 An interest rate cut from the FOMC?

“Markets are pricing in an 80% chance of a cut in the next meeting which is in September and slightly less than that for October and then perhaps around about 50% in terms of the December cut. Although these probabilities do change quite a bit.” BM

 

 

This article originally appeared on Investec’s FOCUS.

 

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In other news…

South Africa is in a very real battle. A political fight where terms such as truth and democracy can seem more of a suggestion as opposed to a necessity.

On one side of the battle are those openly willing to undermine the sovereignty of a democratic society, completely disregarding the weight and power of the oaths declared when they took office. If their mission was to decrease society’s trust in government – mission accomplished.

And on the other side are those who believe in the ethos of a country whose constitution was once declared the most progressive in the world. The hope that truth, justice and accountability in politics, business and society is not simply fairy tale dust sprinkled in great electoral speeches; but rather a cause that needs to be intentionally acted upon every day.

However, it would be an offensive oversight not to acknowledge that right there on the front lines, alongside whistleblowers and civil society, stand the journalists. Armed with only their determination to inform society and defend the truth, caught in the crossfire of shots fired from both sides.

If you believe in supporting the cause and the work of Daily Maverick then take your position on the battleground and sign up to Maverick Insider today.

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Leeds United 1-0 Brentford: Eddie Nketiah scores winner on home debut

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Eddie Nketiah’s goal was his second in two games in all competitions for Leeds

Eddie Nketiah scored on his Championship debut to earn Leeds United a late but deserved win at home to Brentford.

The 20-year-old, on loan from Arsenal, tapped in from Helder Costa’s square ball within four minutes of coming on as a substitute.

The hosts had the better of the game and victory gave them 10 points from a possible 12, seeing them top the early Championship table on goal difference.

For Brentford, the defeat was their second from their opening four league games and their first away from home, leaving them six points behind the strongest starters.

After a relatively quiet first half, Leeds applied significant pressure in the second and finally found a way past the visitors’ defence thanks to two of their substitutes.

Wolves loanee Costa – who was introduced with 25 minutes remaining – made a good run down the right and played the ball across perfectly for Nketiah to slot home in the middle.

The England Under-21 international, who joined Leeds on a season-long loan deal from the Gunners on transfer deadline day, also scored at Salford City in the Carabao Cup on his Leeds debut on 13 August.

His goal saw pace-setting Leeds add to their early-season away league wins over Bristol City and Wigan, as they claimed their first home victory of 2019-20 after drawing with Nottingham Forest.

The Bees’ best chance arguably fell to Said Benrahma in second-half stoppage time, but he blazed well over the bar after the ball had fallen nicely for him just outside the area.

Sweden centre-back Pontus Jansson – who scored for Leeds in this fixture at Elland Road last term – captained Brentford against his former club following his July move to Griffin Park for an undisclosed fee.

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Sharper teeth for Parliament’s financial watchdog committee as Scopa and SIU agree to work together

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Parliament’s Standing Committee on Public Accounts (Scopa) on Wednesday reached an agreement with the Special Investigating Unit (SIU) to refer various cases to the SIU for investigation.

Scopa is an important watchdog committee which oversees all state expenditure. 

The agreement has the potential to bolster the efforts of the SIU to recover funds lost to the state from corruption or irregular spending, much like the Special Tribunal established by President Cyril Ramaphosa earlier this year.

Scopa spokesperson Faith Ndenze issued a statement on behalf of chairperson Mhluleko Hlengwa, welcoming the agreement.

“The committee and the SIU are currently developing modalities and operating procedures to regulate the process to be followed in such cases.

“Scopa believes that this move will strengthen accountability and consequence management, particularly as it occurs against the backdrop of the amendment of the Public Audit Act, which also seeks to strengthen accountability.

“As Scopa holds meetings with stakeholders, it will find spaces and areas of agreement in terms of what the committee can and cannot do,” the statement reads.

Fin24 reported on Wednesday on some of the successes and forthcoming efforts of the SIU. 

“…the Special Investigating Unit has filed a court application on behalf of Eskom to set aside the Tegeta Brakfontein coal supply agreement to the value of R2.7bn.”

In February, the Sunday Times reported that the SIU was investigating the alleged theft of R139bn from Eskom, related to the construction of the Medupi and Kusile power stations, reportedly part of a broader SIU investigation into the theft of about R170bn from the power utility.

The statement concludes that “having met yesterday with a principal partner, the Auditor-General, as well as the Anti-Corruption Task Team (ACTT) and the National Treasury, it is apparent that Scopa is laying a solid foundation for its work going forward”.

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