Lest we forget the biggest fraud by the 17 banks

We need a commission of enquiry

The collusive conduct of the banks previously uncovered by the Competition Commission seems to have lasting implications for the South African economy. This article has more questions than answers.  The only people that can answer the questions raised by the article are the 17 banks, their management and boards.  Although the Competition Commission looked at this issue and found the banks guilty of collusion, many questions remain unanswered.  The commission of enquiry into the conduct of the 17 banks would be one of the instruments that could help to extract answers and accountability on this matter.


It has always been my intention to write something to probe the collusive conduct of the 17 banks that were involved in the currency fixing.  However, I was so reluctant because I am not the subject expert on this matter, and thought getting the answers would be impossible because of the influence of capital, its agents and drivers, the private corporations.  However, while browsing through internet around on the 16 February 2019 I came across an ABSA media brief that Maria Ramos has chosen to retire in February 2019 when she turns 60.  Apparently, ABSA then appointed an Interim CEO, Mr Renévan Wyk, who served as the Register of Banks within the South African Reserve Bank and was with Nedbank for 19 years.

Then I started asking myself why would ABSA opt to appoint a retired banker?  A second thought then crossed my mind why would Maria Ramos leave without telling the nation of her involvement in the currency fixing scandal?

On the 19 February 2017 Yonela Diko published a piece with the Daily Maverick and called on a parliamentary commission of inquiry into the big four banks on a broad range of issues, including hidden fees and charges, credit card gouging, collusion over interest rates and manipulation of exchange rates, dishonoured insurance policies and possible squandered life savings.  Diko stated that seventeen banks were referred to the Competition Tribunal, accused of manipulating the value of the rand.

The Commission investigated the case of price fixing and market allocation in the trading of foreign currency pairs involving the rand since April 2015, with local banks Absa and Standard Bank named, along with Investec and Standard Chartered Bank.  The following banks were also found to have been active participants in the currency manipulation: Australia and New Zealand Banking Group Limited; Bank of America Merrill Lynch International Limited; Barclays Bank; Barclays Capital Inc.; BNP Paribas; Commerzbank AG; Credit Suisse Group; HSBC Bank Plc.; JP Morgan Chase & Co; JP Morgan Chase Bank N.A.; Macquarie Bank Limited; Nomura International Plc.; and  Standard New York Securities Inc.

The findings of the Competitions Commission

The Competition Commission 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 the US dollar/rand currency pair. Further, the Commission found that the respondents manipulated the price of bids and offers through agreements to refrain from trading and creating fictitious bids and offers at particular times. They reached agreements to refrain from trading; taking turns in transacting and by either pulling or holding trading activities on the Reuters currency-trading platform. They also created fictitious bids and offers, distorting demand and supply in order to achieve their profit motives.  This is serious!  Could it be that highly sophisticated fraud was committed by the banks?

The cause and effect

Synman (2008) defines fraud as the unlawful and intentional making of a misrepresentation which causes actual or which is potentially prejudicial to another.

For me the very first requirement for fraud is that there must be a misrepresentation, the perversion or distortion of the truth.  Snyman equates misrepresentation to deception by means of a falsehood.

We do not know whether the actions of the banks were designed to cause harm to the citizens of this country and its economy, but one can strongly argue from a nonprofessional point of view that South Africans suffered great harm.

It is for this reason that we need to probe the nature and extent of the harm suffered.  Corporates would always find a smart way to pass burden to its customers and the poor finds themselves bailing the rich from their actions or inactions.

Could it be possible that South Africans had to or are carrying the cost of the collusive conduct of the banks?

The role of the Reserve Bank

Although not bluntly put, in his article Diko noted weakness in the investigation conducted by the South African Reserve Bank (SARB) in partnership with the Financial Services Board which looked into the foreign exchange practices and found no evidence of serious and widespread misconductin the South African foreign exchange market. Really?

The fact that the SARB says there is no serious and widespread misconducttells us that something is wrong. However, according to the SARB, the conspiracy was not serious or widespread. I strongly think the South African Reserve Bank simply brushed this matter off.

Correctly, the SARB exposed the widespread corruption at the VBS Bank but failed to find widespread misconduct by 17 banks. Wow! Why did the SARB not appoint an independent commission of enquiry to probe the conduct of the 17 banks?

Commission of enquiry

Like any other matters of national importance that attracted public interest, government must establish a commission of enquiry chaired by the retired judge but composed of high profile economists who have experience in the global financial markets.

It is without any reasonable doubt that a process of reviewing the existing legislation must unfold to ensure that there is an enabling legislation that will decisively clamp down on all abusive acts and outright banking fraud.

The commission of enquiries, particularly the State Capture Commission, uncover the extent of the role of the rot and players that we had never imagined to take part in the collapse of our government.

Equally, we need a commission of enquiry to ask questions and probe the effects of the collusive conduct of the banks on various socio-economic challenges we face today:  poverty and unemployment, weak economy, low appetite of investment inflow etc.

Otherwise, it would be difficult to convince ordinary South Africans that we are indeed equal before the law (authorities) regales of our social and economic standing. The rich corporates and its bosses cannot go without answering to the nation on their conduct.

The South African banks had hoped that this matter would quietly die out and the banks had down played the extent to which this could erode the trust and confidence the society has on the banking sector at large.

Bongani June Mwale is the Provincial Secretary of South African National Civic Organisation in Mpumalanga (Wrote on his personal capacity)


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