‘Banks taking part in forex cartel must face harsh penalty’

Banks that are found guilty of being involved in the so-called forex cartel should have their licences annulled, according to an expert.

Redge Nkosi, founder and executive director of Firstsource Money and Public Banking of South Africa, said this during an interview with Sunday World on Monday.

This after the Competition Tribunal last week confirmed that lender Standard Chartered Bank had reached an agreement following its involvement in the so-called forex cartel case, paying an administrative penalty of R42.7-million.

The British multinational also agreed to cooperate in the prosecution of a case that involves 28 banks accused of manipulating of the US dollar and rand currency pair between 2007 and 2013.

Penalty not harsh enough

“The penalty is not big enough to deter these guys [banks] because they can make billions in a day [in forex trading] … Penalising them just a few millions of rands makes no difference,” said Nkosi.

“The cost to the economy and to the people is fundamentally high. There ought to be a change in legislation to ensure that we penalise these guys, that their licences are suspended for a while and they give us a full account on why they are doing this.”

He said suspending the forex trading licences of banks will not collapse the financial services sector.

Nkosi said: “Suspension of a licence to trade in foreign exchange can be maintained for as long [as a regulator] wants, and they [banks] can make money in other aspects.

“Perhaps they need to be threatened, because this practice can be very harmful to people.”

He, however, said banking groups that are repeat offenders on currency trading should have their licences fully removal.

Nkosi added that the forex cartel had depressed the value of the rand, resulting in higher prices of goods and services.

“[As a country] we import a great deal and when the inflation goes up, interests rates go up, the amount we pay on debt goes higher and higher,” said Nkosi.

“The economy as a whole suffers because when there is a high inflation and interest rates, very few people want to invest, resulting in less jobs and poor economic growth.”

Maria Ramos’ apologises

In February 2017, the then Barclays Africa chief executive Maria Ramos apologised for the retail lender’s role in the cartel which rigged the local currency.

“That was sufficient evidence … for Maria Ramos or Absa to tell us more, why they did it and with whom … and how much money they have made from it, so that we could be able to deal with other culprits,” he said.

Nkosi, however, said this was not an easy case.

“First, we don’t know if the Competition Commission has the capacity and manpower to deal with this matter.

“It is quite complex because the foreign exchange market is where about $6-trillion [R110-trillion] are traded in a day.”

Black Business Council (BBC) chief executive Kganki Matabane said: “Those who are found to have manipulated the rand should face the full might of the law, without exception.

“For the justice system to be credible, the fine should be proportionate to the offence. We are of the opinion that the fine handed to Standard Chartered is very lenient and won’t deter those who are planning to do the same offence.

“The country lost billions due to their alleged actions and [they] should pay billions.

“We are concerned that the commission takes too long to conclude matters and should be capacitated sufficiently so that it can function properly.”

Matabane added that the commission should move with speed and bring all the perpetrators to book.

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