New RBM forex trading guidelines
The Reserve Bank of Malawi (RBM) has issued new guidelines for foreign exchange trading activities in what it called “a bid to monitor efficiencies on the market”.
RBM has written all chief executive officers for commercial banks instructing them to start following the new guidelines effective March 16, 2016.
In a letter dated March 11, 2016 signed by RBM governor Charles Chuka which The Business Times has seen, the central bank has, among other things, ordered banks to restrict the spread between buying and selling exchange rates at not more than three percent.
It says RBM shall continue to compete and provide closing prices to all Authorised Dealer Banks (ADBs) for discovery purposes.
“All ADBs shall be valuing their end of day foreign exchange positions by using average trade weighted end of the day buying prices for assets and average end of day weighted selling prices for liabilities as reported by RBM,” reads the letter, in part.
“All ADBs shall be required to use end of day average selling prices for all own transactions on their books, including declaration and externalisation of end of period dividends,” reads part of the letter.
RBM has, however, allowed the banks to freely determine and publish their opening exchange rates and adjust their rates during the day “provided that such changes are published and reported to RBM at all times”.
It warns that those who shall contravene the guidelines shall attract a minimum penalty of K50 million and could face suspension from dealing in foreign exchange market for a minimum of one trading week.
RBM spokesperson, Mbane Ngwira, said the new guidelines are aimed at streamlining the operations of banks for efficiency in the trading of foreign currency on the market.
He brushed aside fears that the guidelines are aimed at controlling the exchange rate.
“We are simply allowing the market to operate efficiently while penalising those who are inefficient,” said Ngwira.
He said Malawi continue to sit on healthy foreign exchange reserves which are currently going up and are close to three months cover at just over US$600 million.
