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The Central Bank of Kenya (CBK) has introduced a forex code for commercial banks that aims to improve transparency in the wholesale foreign currency market in Kenya.
The Kenya Foreign Exchange Code is set to facilitate better functioning of the market, reinforcing Kenya’s flexible exchange rate regime for greater resilience of the economy.
“The FX Code sets out standards for commercial banks, and aims to strengthen and promote the integrity and effective functioning of the wholesale foreign exchange (FX) market in Kenya,” said CBK.
The FX Code focuses on six leading principles to be adhered to by institutions, they include ethics, governance, execution, information sharing, risk management and compliance, and confirmation and settlement processes.
According to the regulator, the FX Code has been developed to respond to emerging issues and address the dynamic nature of the financial markets, and specifically address emerging challenges in the foreign exchange market.
Banks will be required to conduct a self-assessment and submit to the CBK a report on their level of compliance with the new code by April 30, 2023.
The CBK expects the FX code to be fully implemented, and each bank to be in full compliance by December 31, 2023.
According to the new code, banks will be required to deploy experienced and qualified personnel with technical knowledge of forex trading.
The new CBK guidelines also prohibit bank personnel handling forex transactions from conflict situations such as receiving gifts and corporate entertainment offers.
The guidelines come at a time Kenya’s forex exchange reserves have declined significantly to stand at just about USD6 billion, an equivalent of 3.6 months of import cover, a new low.
Some commercial banks in Kenya have been accused of hoarding dollars or selling at extremely high prices, destabilizing the foreign exchange market.
The Kenya shilling has declined against the dollar to trade at 130, a historic low, with the fall partly blamed on low foreign exchange reserves.
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