CBK Gives Banks An “Ethical Code” For Dollar Transactions

The Central Bank of Kenya (CBK) has issued Kenyan banks with a new foreign exchange code that will direct dollar transactions failure to which banks will face fines and license suspension. The Kenyan Bankers Association is yet to comment on the issue.

The 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.

“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,” says the code.

The code has already taken effect and all banks are expected to comply. The issuance of the code came a few hours after President William Ruto warned traders and banks that were holding onto dollars making the Kenyan shilling suffer that their time was up.

The CBK expects 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.

Kenya has been hit by an acute shortage of the dollar currency for more than three months. The shortage has hit hard on manufacturers and businesses that could not import goods from other countries. Kenya relies on the dollar to pay for the importation of goods.

There have been allegations that some traders were holding onto the dollar so as to make the shilling suffer for them to make more money in the local currency.

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