Tribunal confirms Citibank’s R69m fine for forex price fixing

26 April 2017 - 18:39 By Katharine Child
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CitiBank's R69-million fine for its role in foreign exchange price fixing has been agreed to by the Competition Tribunal.

This follows a settlement agreement reached between the bank and the Competition Commission.

The Tribunal noted that the fine does not exceed 10% of Citibank’s annual turnover in South Africa.

The Competition Commission had recommended fines of up to 10% of banks' annual turnover in SA after investigating three local and 15 international banks for manipulating the price of bids and offers on the rand. Most of the trades took place off shore.

  • Citibank top brass face corruption chargesCriminal charges have been laid against Citibank executives for their alleged roles in "corrupt and collusive actions" relating to the foreign exchange fixing scandal being investigated by the Competition Commission. 

Citibank settled with the commission and admitted that between September 2007 and October 2013‚ Citibank traders manipulated "the price of bids and offers through agreements to refrain from trading and creating fictitious bids and offers at particular times".

The traders from different banks helped each other by stopping trading for a short time to reduce supply of rand or dollars in order to push up prices. They also colluded on prices to charge customers and decided which bank would serve specific customers. Citbank NA’s income last year was $69 billion dollars or‚ assuming an exchange rate of R13.23‚ R924 billion in rand terms. This is before expenses and tax.

The bank's fine is 0.007 %‚ far less than one percent‚ of its overall income last year. This means the fine is a drop in the ocean for the bank.

  • More collusion offences added to claims against rand-rigging banksThe Competition Commission has added new complaints against 18 banking entities‚ outlining further offences that Standard New York and the Bank of America allegedly committed while rigging the rand-dollar exchange market. 

"In terms of the settlement agreement Citibank N.A. will appear as a witness at their competitors’ hearings‚" the tribunal said. Citibank has already begun supplying information that is helpful to the Commission’s investigation‚ it said.

The Tribunal said: "Citibank is the first of the banks to reach a settlement agreement with the Commission in the complaint the Competition Commission v Bank of America Merrill Lynch and Seventeen Others lodged with the Tribunal."

The Competition Tribunal determined the quantum of the fine. Analysts said at the time of the findings on the price fixing that the activity would have been unlikely to affect the price of the rand‚ because currency is traded to four decimal points and these were manipulated. The manipulations in currency would have affected the decimal points but would not have changed the currency value.

The court papers named a handful of traders abroad who colluded on price fixing‚ meaning the banks' senior management was likely to be unaware of what took place.

There are more than $5 trillion dollars' worth of currency trades globally.

Legal and financial experts believe it is unlikely that the implicated banks - which include Bank of America Merrill Lynch‚ HSBC Holdings‚ BNP Paribas‚ Credit Suisse Group‚ JPMorgan Chase & Co and Nomura Holdings - would have to pay huge fines if the Competition Tribunal found against them.

Prosecution of the banks would be difficult because all of the trades were offshore. The Competition Act gives the authorities jurisdiction over activities that took place‚ or had an economic effect‚ in South Africa. Lawyer Mitch Morrison‚ a director of Fullard Meyer Morrison‚ previously said this meant some banks might be able to dismiss the complaint because they do not have branches in South Africa.

TMG Digital/TimesLIVE

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