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Three of South Africa’s largest four banks, Standard Bank, FirstRand, and Nedbank, have been left seething after suffering reputational harm over the past decade due to allegations that they conspired with their international peers to manipulate the rand’s exchange rate.In what was the Competition Commission’s biggest case in a generation, the banks have had to defend their business practices since 2017, with the matter brought to finality by the Constitutional Court on Tuesday.The apex court dealt a blow to the Competition Commission’s case against the banks — in a judgment that vindicated the companies’ long-held position that the watchdog’s case against them was weak. The antitrust watchdog had sought fines of up to 10% of local revenues, citing the wide-ranging effects their conduct has had on the economy in a battle that dates back to 2015.The case stems from the commission’s decision to prosecute 28 banks, including South African and foreign banks which, the commission alleged, colluded and conspired with each other to manipulate the foreign exchange rate in respect of the dollar and the rand for their own benefit. Standard Bank South Africa (SBSA), the country’s largest lender by assets, described the commission’s multiyear pursuit as bordering on torture, accusing it of repeatedly squandering opportunities to present a coherent case against it.SBSA argued that the commission’s conduct was inconsistent with that of a regulator acting impartially and without fear, favour or prejudice.The commission was appealing the competition appeal court ruling, which exonerated the majority of the banks, finding that there was “simply insufficient evidence” to sustain the conclusion that the banks in question had participated in the alleged conduct regarded as the most egregious in competition law.Justice Owen Rogers, who wrote the unanimous judgment, found the competition watchdog wanting in its decade-long pursuit of SBSA.“The commission failed, before adding SBSA to the referral, to direct any inquiries to the bank. SBSA was thus deprived of the opportunity of presenting facts to the commission to show that its thesis in relation to the bank was factually flawed,” reads the judgment.The commission, the court found, had incorrectly identified the bank’s employee Bryan Brownrigg as a key player in the conspiracy.SBSA insisted that Brownrigg was a salesperson and he played no role in determining the bank’s bid-offer spreads and could not bind SBSA to foreign currency transactions. “It is difficult to imagine that the commission would have alleged that Mr Brownrigg was an SBSA trader if, before including SBSA in the referral, it had made basic inquiries with SBSA and been told the true position. It is fanciful to imagine that a bank would lie on a matter of this kind (assuming it were inclined to lie at all), since the lie would immediately be exposed by the most rudimentary process of documentary discovery,” Rogers said. Reacting to the Constitutional Court’s judgment, the Standard Bank Group said the judgment ends many years of litigation over “these unfounded allegations”.“The commission’s case was based on incorrect factual assumptions and lacked the necessary evidence to justify any further legal proceedings against Standard Bank,” the lender said.“The judgment affirms the consistent position maintained by the bank since the inception of this matter in 2017 and throughout these proceedings, that neither Standard Bank nor any of its employees were involved in a conspiracy to manipulate the rand.“Standard Bank conducts its business with integrity and in full compliance with all applicable laws and regulations. Standard Bank will continue to play a constructive role in South Africa’s financial markets and in supporting growth throughout the South African economy.”In Nedbank’s case, the court found the commission’s application for leave to appeal does not raise, as a ground of appeal, that the competition appeal court failed to address the merits of the case against Nedbank. “These arguments are of a kind that do not engage our jurisdiction. In the circumstances, the [competition appeal court’s] decision in respect of Nedbank must be allowed to stand.” The commission’s appeal partially succeeded in the case of JPMorgan Chase Bank and Standard Americas Incorporated. The commission will also be unable to prosecute Credit Suisse Securities. The Swiss investment bank won in its appeal challenging the commission’s decision to add it to the litigation. The commission will be able to pursue the case against multinational banks BNP Paribas, JPMorgan Chase Bank, HSBC Bank and Standard Americas Incorporated. The commission’s argument before the country’s highest court was that the banks’ conduct “weakened the rand” and continued to negatively affect the country’s imports and exports of dollar-denominated products worth $2-trillion. FirstRand, SA’s most valuable banking group, argued that it has been unfairly dragged into the case, adding that the case against it is “unsustainable” due to a lack of evidence.Nedbank has also lashed out at the case presented against it by the commission, saying it is nearly impossible to properly discern the case that the commission has sought to make against the bank.The commission said it is still studying the judgment.Business Day
