BUSINESS DAY TV: ‘Banks must face consequences of breaking the law’
Competition Commission divisional manager of cartels Makgale Mohlala on the allegation against some of SA’s banks for price fixing and collusion.
Makgale Mohlala is divisional manager of cartels at the Competition Commission.
BUSINESS DAY TV: We’re taking a look at the Competition Commission’s allegation against some of SA’s banks for price fixing and collusion this evening. Joining us on the line is Makgale Mohlala, divisional manager of cartels at the Competition Commission.
Makgale ... so perhaps just for clarity sake the Competition Commission has recommended a 10% fine on revenue or turnover from the banks. Are we talking about total group turnover from those banks or just the divisions where the price fixing may have taken place?
MAKGALE MOHLALA: The annual turnover of the firm, so its 10% of the bank that is cited as a respondent in the ... papers.
BDTV: If that is the case, then how realistic are we being with this because that could severely cripple the local banks in SA?
MM: The law actually empowers us to do that and if the banks think that will cripple them, they can always come and settle at a much discounted price ... penalty.
BDTV: The investigation, has it been conducted independently of the Reserve Bank and to what extent are you and the Reserve Bank going to co-operate on this going forward?
MM: We conducted our investigation independently of the Reserve Bank. The Reserve Bank was not really part of the investigation. But although they were not part of the investigation there was engagement as the Reserve Bank is the regulator in the banking sector. Those engagements were really not about the Reserve Bank getting involved in the investigations that we talk about, letting them know that the commission is investigating so that they know.
BDTV: The reason I ask is clearly if the banks have transgressed, then they should be punished, but at the same time you need to ensure that it doesn’t result in a disruption of the financial system. Is that a concern for you?
MM: The banks, like any other firm, when they contravene the law they should ... the consequences. So the issue about financial stability is the issue that the banks themselves should also take into account when they make decisions about what they want to do with this matter going forward, in other words banks can’t be saying that they can’t break the law and expect that they should not be held accountable because of the issue around financial stability.
Financial stability is very important and is a consideration that must be taken into account by all the parties involved, in proving ... themselves.
BDTV: Much of the actual price fixing took (place) offshore and we were discussing this a little earlier on the show, to what extent are you working with other international agencies in countering or holding banks to account for their actions?
MM: We did our investigations on our own, being the matter falling squarely in the jurisdiction of the South African Competition Commission, so we have not really spoken that much with other foreign agencies. If you recall, the US and the UK have already fined banks for the same conduct, so this is really the South African leg so to speak, of the same investigations. By the time that we were investigating, those jurisdictions were already completing their own investigations.
BDTV: Is it possible to quantify how much banks benefited from this price rigging of the forex pairs and how much customers may have been disadvantaged by, is there a number you could put to it?
MM: Not quite. It’s very difficult to quantify to what extent banks have benefited. What we know is that their currency trading is huge, it is estimated that on a daily basis about over R5-trillion is said to be traded, and R50bn in terms of US dollars is traded with the rand and US dollar on daily basis. So there are huge figures that we are not able to quantify as to know how much banks benefited.
But in terms of customers suffering or being victimised by this, obviously when you manipulate currency, the banks are doing that to increase their profits and in so doing they are disadvantaging customers. Customers end up buying the currency expensively when they were supposed to be buying them cheaper.