CBK moves to tame dollar crisis
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CBK introduces tough rules (Kenya Foreign Exchange Code) on commercial banks to tame the dollar crisis
CBK introduces tough rules (Kenya Foreign Exchange Code) on commercial banks to tame the dollar crisis.
The Central Bank of Kenya (CBK) has tightened conditions for commercial banks by introducing fresh guidelines aimed at improving transparency in the foreign currency market.
CBK on Wednesday, March 22, introduced six new guidelines to commercial banks in a bid to ease the country’s current dollar shortage.
The CBK announced the Kenya Foreign Exchange Code (the FX Code), a set of rules designed to increase market transparency for foreign currencies.
The regulator claimed that the rules will ensure moral and transparent transactions in an effort to stop the chronic shortage of biting insects.
In a big shift, the financial regulator has bestowed bigger responsibility on lenders that are expected to see more ethical and transparent transactions in the market amid public outcry on pricing and shortages of the US dollar.
“It will facilitate better functioning of the market, further reinforcing Kenya’s flexible exchange rate regime. The FX Code is intended to promote a robust, fair, liquid, open, and appropriately transparent market,” the statement read in part.
Commercial banks were directed by CBK to keep track of all foreign exchange transactions and submit quarterly compliance reports. The banks would also be forced to deploy skilled employees who are knowledgeable in currency trading.
Also, commercial lenders would not be allowed to handle currency exchange transactions in hostile environments, such as when accepting presents or invitations to corporate events.
Also, CBK ordered local lenders to set up special boards to regulate the FX market.
The banks were told to create compensation and advancement schemes and were forbidden from using trading tactics or quoting prices with the aim of undermining market integrity.
The new regulations came in the wake of the dollar crisis/shortage, which has piled pressure on imports including fuel as the Kenya Shilling continues to depreciate.
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In addition, President William Ruto has directed oil brokers not to hoard dollars as the government would transact using Kenyan shillings.
“As a Government, we have made innovative intentions and undertaken an innovative strategy to ensure that we ease the burden of the availability of the dollar in our market.
“We just concluded last week an arrangement in our fuel sector that will see Kenya access all our fuel needs in a differed six-month credit.
“That will eliminate a demand of Ksh65 billion ($500 million) every month from this market,” the President stated during the listing of Laptrust Imara (REIT) at the Nairobi Security Exchange (NSE) on Wednesday, March 22, 2023.
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