Banking Collusion: Why you should care
More than a dozen banks have been referred to the Competition Tribunal for colluding to fix forex prices, but how does the affect the man on the street?
The Competition Commission says it has been investigating a case of price fixing and market allocation in the trading of foreign currency pairs involving the rand since April 2015.
What did the banks do?
Econometrix Chief Economist, Dr Azaar Jarmine says banks can generate profits by charging commission and on the difference between the buying and the selling price of currencies.
Jarmine says it's not a high profile area of profitability, but it can generate a significant amount of money.
"What is being suggested here is that they exploited the situation in order to make extra profits this way," says Jarmine.
How was the ordinary South African affected?
Jarmine says the ordinary South Africans may have been affected by paying more commission than he or she might otherwise might have been liable for during foreign exchange transactions.
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On the other hand, Jarmine says some South Africans could have benefitted as well.
"Theoretically, in some respects, the fact that banks were able to generate additional earnings from these foreign exchange operations, you could argue means that there was less pressure on them to generate earning from bank charges, from interest charged and that kind of thing," says Jarmine.
Efficient Group Economist Dawie Roodt says if there is collusion between the banks, it is possible for traders to push the exchange rate of the currency much weaker.
"That will affect the price of imports, inflation, interest rates and eventually economic growth," says Roodt.