The Central Bank of Kenya (CBK) has frightened banks with a new foreign exchange code and threats of punitive fines and licence suspension after President William Ruto cautioned traders hoarding dollars to prepare for huge losses in a few weeks.
The new foreign exchange code prohibits banks from engaging in trading practices, quoting prices or making transactions with the intention of manipulating price movements or disrupting the functioning of the market.
CBK says the code which is already in effect will ensure the integrity and effective functioning of the forex market in the country.
“Market participants should not engage in trading strategies or quote prices with the intent of hindering market functioning or compromising market integrity. Such strategies include those that may cause undue latency, artificial price movements, or delays in other market participants’ transactions and result in a false impression of market price, depth, or liquidity,” states the code.
Lenders have been directed to immediately conduct a self-assessment and submit to the cbk a report on their level of compliance with the new code by April 30, 2023.
Press release: Kenya Foreign Exchange Code pic.twitter.com/GYdGA6SaWo
— Central Bank of Kenya (@CBKKenya) March 22, 2023
Every bank will also be required to submit a detailed compliance implementation plan approved by their boards by June 30, 2023.
CBK wants the FX code to be fully implemented, and each bank to be in full compliance by December 31, 2023.
“CBK may take appropriate enforcement and other administrative action including monetary penalties as provided for under the Banking Act against any market participant (banks) for failure to comply with the FX Code,” says the new code.
The regulator has also been tasked with the revival of the interbank forex market, where banks buy from one another whose collapse was as a result of the weakening shilling which crossed the Sh130 mark this week.
“I’m happy that the players in that sector including our banks are coming forward and participating and are working with the CBK so that we can again take charge of our market and that it is not distorted by brokers,” President Ruto said.
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