Streamline forex trade
The move by the Central Bank of Kenya (CBK) to review regulations in the foreign exchange trade is a timely one and should help restore confidence in the market.
Central banks are the first line of defence in maintaining the stability of currency markets, hence it is encouraging to see the CBK step out in the public after weeks of uncertainty about the goings-on in this sensitive segment.
A persistent biting shortage of the US currency — which has widened the spread between the official and open-market rates — had raised eyebrows amid concerns of possible illegal practices in the forex market while households and businesses suffered the consequences of the battered shilling.
The action by the CBK to release a new code for banks participating in the forex market is therefore welcome because it promises to address issues on transparency, which is the hallmark of fair trade.
In a notable shift, the regulator has bestowed bigger responsibility on commercial banks to ensure ethical and transparent transactions in the forex market amid public outcry on the pricing and shortage of the US dollar.
The new regulations also target instilling high ethical standards among bank officials directly involved in forex trade to limit risks of foul play.
We hope commercial banks will comply with the CBK regulations and uphold transparency by ensuring a proper flow of timely, reliable as well as relevant information to traders and customers in the forex market to guide decision-making.
Foreign exchange markets serve an important socio-economic function by allowing for currency conversions and facilitating global trade, hence all activities there should be above board and in the interest of the country, investors and consumers.
Kenya runs a flexible exchange rate system where the value of the shilling is determined by the market forces of demand and supply and the CBK must ensure the transactions in the forex market are purely driven by these fundamentals.