Nedbank has again denied that the bank committed any wrong in relation to the interest rate swap transactions it concluded with Airports Company SA (ACSA) between 2009 and 2011.
The transactions, which were highlighted in Chief Justice Raymond Zondo’s report on state capture, came back into view last week when News24 reported that ACSA has referred Nedbank to the Special Investigating Unit (SIU).
“ACSA has approached the SIU for it to initiate legal proceedings on behalf of ACSA against Nedbank,” the publication quoted the company as saying.
Regiments, which was appointed as financial adviser to ACSA and Transnet, pocketed substantial fees from brokering funding arrangements, which included a series of multibillion-rand interest rate swap transactions with Nedbank.
Chief Justice recommended that law enforcement agencies investigate Nedbank and its employees for their alleged role in a “corrupt” contract involving ACSA and the Gupta-linked Regiments Capital.
Read: Nedbank denies any wrongdoing in ACSA transactions
In Nedbank’s 2023 integrated report, published last week, chief executive Mike Brown said the bank continues to co-operate fully with various inquiries and investigations in respect of these transactions.
He said nothing has come to Nedbank’s attention in any of these inquiries and investigations that would change its view that there is no evidence of any wrongdoing, collusion, or corruption by Nedbank or any of its employees. If these transactions were tainted by corruption on the part of Regiments, or Nedbank’s clients or their employees, “Nedbank was unaware of this at the time of the transactions and acted as a reasonable banker based on the knowledge we had at the time”.
Brown said Nedbank’s fees and returns were market-related and all legal documentation and authorisations for the transactions are in place. “Given this position, we will strongly defend any litigation that may be brought against us.”
R50m internal fraud
Nedbank said its clients and employees continue to be the targets of increasing levels of fraud attacks.
The report disclosed that the bank was the victim of an internal fraud in 2023.
“While no client funds were impacted, the cost to Nedbank, net of insurance recoveries, amounted to R50 million. In line with our principle of zero tolerance. we immediately investigated the matter fully and took the necessary disciplinary and criminal actions against the implicated employees and strengthened processes and procedures to prevent this from reoccurring.”
Nedbank said the challenging external environment combined with the rapid increase in digital activity are the key drivers of increasing levels of financial crime. According to the South African Banking Risk Information Centre, industrywide digital banking fraud losses increased by almost 70% to R740m in 2022.
Closure of client accounts
The integrated report also addressed the closure of clients’ bank accounts. Nedbank is among the banks that have been embroiled in litigation with the Sekunjalo group since they shut accounts linked to entities associated with the group, citing reputational risk.
In December 2023, the Supreme Court of Appeal dismissed an Equality Court order that Nedbank had to reopen the group’s bank accounts. Sekunjalo has approached the Constitutional Court to overturn that decision. In January 2024, the Competition Tribunal refused to extend an interim interdict against Nedbank and other banks.
“Decisions to terminate banking relationships with clients are neither arbitrary nor discriminatory and are taken extremely seriously, as clients are the essence of our business. Such decisions are taken only after a rigorous assessment and an internal independent governance process with reference to all the relevant information and facts have been followed, including a comprehensive due-diligence process overseen by the board,” Nedbank said.
The bank said it closed the accounts of just over 190 clients in 2023 because of its reviews of client activity and related reputational risks.
Forex manipulation allegations
Staying with reputational matters, Nedbank reiterated its position that allegations its traders manipulated the rand-dollar exchange rate were baseless.
The Competition Commission cited 28 banks in a referral of a complaint to the Competition Tribunal regarding allegations on the rand-dollar exchange manipulation.
Nedbank and the implicated banks raised different technical arguments against the referral. The Competition Tribunal dismissed these objections.
Nedbank lodged an appeal and review application with the Competition Appeal Court (CAC) against the dismissal, along with 15 other banks.
In January 2024, the CAC dismissed the Competition Commission’s case against Nedbank. The Competition Commission has since applied to the Constitutional Court for leave to appeal the CAC’s decision in respect of Nedbank Limited but not the Nedbank Group.
Read: Appeal on appeal: Competition Commission shows its tenacity in rand-fixing case
Nedbank said there is no evidence against it or any of its traders being involved in a “single overarching conspiracy” to fix the rand-dollar currency pair in contravention of the Competition Act.
Nedbank therefore intends to oppose the Competition Commission’s leave to appeal to the Constitutional Court and will continue to defend itself against all these claims brought by the Competition Commission.
Fines and penalties
The report disclosed that Nedbank received fines, administrative sanctions, or penalties of R17m (2022: R25m) relating to the contravention of regional-specific regulator or legislative requirements in the United Kingdom and some Southern African Development Community countries outside of South Africa. “Many of these cases were self-identified and the shortfalls were rectified.”
