The impact of alleged currency manipulation by 28 local and international banks which apparently took place more than a decade ago and was recently uncovered by South African regulators, has been allayed through relevant legislation and a transparent banking sector.
This is the view of chief executive officer of the Bankers Association of Namibia (BAN) Brian Katjaerua, who noted that the South African case speaks to a profit period ending more than 10 years ago in 2013.
Some regional and international media have reported that the currency manipulation by banks, some of whom also have noteworthy operations in Namibia, possibly involved up to N$1 trillion in daily trades.
“The BAN notes that the Bank of Namibia (BoN) as the banking industry regulator in Namibia has competently and extensively covered the questions of local governance in the past few days, and local mitigation is in place against such practices through regulation and legislation,” he stated in response to New Era queries.
Katjaerua added that considering governance and legislation reforms in South Africa and Namibia over the past 10 years, and what is relevant currently in the Namibian market, much of the manipulation alleged to have occurred has been mitigated through legislated and transparent banking practices and regular reporting by commercial banks, which is also in line with local laws and international
practices.
“With regards to such activities having had a possible impact on the Namibian economy and on Namibian bank customers, it has been argued by South Africa’s national treasury that over the period concerned, any collusion by 28 local and foreign banks to manipulate the rand/dollar exchange rate had no impact on the rand depreciation since 2013. It said rand depreciation was driven by broader changes in the global and domestic economies, and any impact of this collusion was limited to individual clients in the South African market market,” he stated.
Considering the one-to-one peg of the South African Rand and the Namibia Dollar, any manipulation of the former would, therefore, affect the latter.
Commenting on the manipulation impact, the BoN recently said the domestic economy would have been mostly affected through trade dynamics changes, exchange rates fluctuation, inflation, and the need for policy adjustments to address challenges.
“The manipulation can potentially interfere with monetary policy implementation as the impacts are transmitted through the inflation pass-through channel, albeit indirectly in the case of Namibia,” stated BoN spokesperson Kazembire Zemburuka.
He added that currency manipulation not only disrupts the regular operations of currency markets, but also adds an additional layer of complexity to forecasting foreign exchange movements. This complexity poses challenges for businesses in terms of planning and executing trade strategies.
Zemburuka said the authorities are taking strong measures against and penalising the financial institutions which were involved in such malpractices, and the loopholes that gave rise to such malpractices have been closed.
“The BoN believes it is such swift actions that will continue to maintain and restore public confidence in the functioning of the currency markets and the financial sector as a whole. The manipulation of any currency often allows the perpetrators the opportunity to harvest unfair profits to the detriment of the citizens, public and corporate sectors,” Zemburuka observed.
Meanwhile, Standard Chartered has agreed to pay a settlement of N$42.7 million to South Africa’s Competition Commission for manipulating the exchange rate. Standard Chartered reached the settlement for its role in fixing and creating fictitious bids, as well as other activities aimed at manipulating the dollar-rand exchange rate between 2007 and 2013.
“They manipulated the price of rands and dollars. Remember, most of the dealer banks have a special licence, which allows them to buy and sell currency. We’re not allowed to do that, but banks are allowed to do that. It is alleged that they manipulated the price of rands and dollars by witholding certain information, or by giving some customers the preference in this. In the process, some people got benefits because they got dollars or rands at a better price,” noted Dawie Roodt, chief economist at Efficient Group in South Africa.