The agreement by Standard Chartered to pay $40 million (R536 million) in fines to settle claims from US authorities related to manipulation of currency prices, including the rand, might be grim news for the commercial bank in South Africa.
While Standard Chartered has admitted to the New York state department of financial services that it manipulated currencies, it is waging a protracted fight in South Africa with the Competition Commission on similar charges.
In an order issued on January 29, US financial services authorities said Standard Chartered engaged in “unsafe, unsound and improper conduct” in its foreign exchange business between 2007 and 2013.
The conduct refers to Standard Chartered currency traders who sought to coordinate and manipulate prices with peers at other banks to move the rand and other emerging market currencies.
“Standard Chartered traders used a variety of improper tactics to benefit the bank – and themselves – by maximising profits or minimising losses at the expense of the bank’s customers, or customers of other banks that were impacted by the misconduct,” reads the US financial services authorities’ order.
Some of the improper activity by at least three Standard Chartered traders was conducted through emails, phone calls and an online chat room called the ‘Old Gits’.
‘We should be able to bully people’
“I think we need an Old Gits meeting to discuss good olé [South African rand] manipulation. We should be able to bully people now far more than any other [currency],” said one trader in the chat room in January 2008, the order document reads.
The Competition Commission said the order by the US financial service authority on Standard Chartered would boost its case in South Africa.
“The order puts the banks on the spot. They have pleaded guilty overseas on the same charges and merits we have brought but pleaded something else in South Africa because they have deep pockets to fight the commission,” the competition watchdog’s spokesperson Sipho Ngwema told Moneyweb.
A lawyer who asked not to be named supported Ngwema’s views, saying it would be difficult for Standard Chartered to fight the commission’s currency manipulation investigation.
Commenting on the inclusion of Standard Charted traders and their attempts to manipulate the rand, a local spokesperson said the bank will continue to cooperate with the commission’s investigation.
“As this is currently a legal matter, you will appreciate that we can’t say any more at this point in time except to assure you of our ongoing commitment to fully uphold the laws and regulations that govern the way we do business in South Africa,” said Standard Chartered’s Geraldine Matchaba.
The commission has had a protracted currency rigging battle with Standard Chartered and 22 other banks, among them Standard Bank of SA, Investec Bank, Bank of America, Merrill Lynch International, JP Morgan Chase, HSBC Bank and Credit Suisse Group.
Bank traders are accused of entering into a general agreement to collude on prices for bids, offers and bid-offer spreads for spot trades in relation to currency trading since 2007. In doing so, they allegedly used platforms such as the Reuters currency trading platform and the Bloomberg instant messaging system (chat room), as well as telephone conversations and meetings, to coordinate their alleged collusive trading activities.
The commission is pushing for a 10% fine on annual turnover against the banks or for them to settle with it – as in the case of Citibank, which paid an administrative penalty of R69.5 million in March 2017.
Since the commission referred its currency manipulation case to the Competition Tribunal in February 2017, banks have fiercely fought the commission by raising objections such as whether the commission has jurisdiction over foreign entities, including Standard Chartered.
Meanwhile, Investec wants the commission’s conduct to be declared by the tribunal as “vexatious and unreasonable”, accusing the commission of missing deadlines on submitting affidavits, and changing its tune on the request for separate hearings of banks.
The merits of the commission’s case have not been heard as the tribunal has yet to rule on the objections raised by banks.