Collusion Case Strengthens Zuma's Hand in Battle With Banks

  • Antitrust regulator says banks rigged foreign exchange trade
  • South Africa’s ANC says case exposes ethical crisis in banking

A finding by the South African antitrust regulator that more than a dozen local and international banks colluded to rig foreign-currency trades will bolster government accusations that the nation’s biggest lenders are monopolizing the financial system and failing to address racial inequality.

The Competition Commission on Wednesday said banks including Investec Ltd., Standard Bank Group Ltd., Bank of America Merrill Lynch, and JPMorgan Chase & Co. participated in price fixing and market allocation. It referred the case to the Competition Tribunal, asking it to declare that the banks contravened the Competition Act and rule that some of them pay fines of 10 percent of their annual revenue.

“These acts of corruption have crudely exposed the ethical crisis in the South African banking sector,” President Jacob Zuma’s ruling African National Congress said in an e-mailed statement. It urged the government to “move with the greatest urgency to diversify the financial services sector, introduce new players and irreversibly transform this industry in favor of the people and the nation.”

South Africa’s five biggest lenders jointly control about 90 percent of the local banking market, and all of them with the exception of Standard Bank have white chief executive officers -- a status quo that has exposed the industry to political criticism. Zuma has suggested that Standard Bank, Barclays Africa Group Ltd., FirstRand Ltd. and Nedbank Group Ltd. may have colluded when they closed accounts operated by companies controlled by members of the Gupta family, who are his friends and are in business with his son.

‘Negative Narrative’

“Their credibility is now questioned on the issue of currency manipulation, when indeed their credibility is also being questioned in terms of their stranglehold over the South African economy, in the words of President Jacob Zuma,” said Daniel Silke, director of the Political Futures Consultancy in Cape Town. “This plays into an existing negative narrative about the ethics and role of the big banks in the South African economy.”

Zuma told lawmakers Thursday that the government will act against those who engaged in market abuse, collusion and price fixing.

“The impact is far reaching as it distorts our economic system,” he said. “We look forward to working with the transformation of the financial sector so that new players can also enter the sector.”

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