Govt Bans Ecobank From Forex Sales Over Regulation Breach
Ecobank Kenya Limited, a subsidiary of Ecobank Transnational Incorporated, has been suspended from the East African country’s forex market by the Kenya’s apex bank for one week.
The bank, was suspended till Monday, April 4th, 2022 for breaching forex regulations in the east African country.
In addition to the suspension, Ecobank Kenya will also have to reverse the exposure that arose when it breached the forex rule.
Ecobank was also mandated to put measures in place that will prevent another breach.
It was gathered that Kenya’s apex bank took the decisive action after discovering that the lender had flouted forex regulations. The suspension will end on April 4th, 2022.
According to the East African, Kenyan banks are required to adhere to a rule which requires them to match their foreign currency assets with their liabilities. They do this by ensuring that the difference between their foreign currency assets and their liabilities “does not exceed 10 percent of core capital”.
The Central Bank of Kenya said in a press statement that Ecobank Kenya Limited breached this rule.
“In investigating Ecobank’s trading practices and a specific transaction that it had concluded, it is evident that Ecobank did not have sufficiently robust risk controls to prevent breaches on its foreign exchange exposure limits, or the inaccurate reporting of its position… Ecobank’s acknowledgement of its obligations as an authorised foreign exchange dealer and its commitment to address the underlying issues is noted,” the apex bank said.
In addition to the suspension, Ecobank Kenya has also been mandated to reverse the exposure that arose when it breached the forex rule. And most importantly, the lender must put measures in place to prevent this from happening again.
“The remedial plan should also point to specific measures to address the unsafe trading practices that led to the non-compliance and to enforce adherence to orderly conduct as stipulated in CBK’s Guidelines on Foreign Exchange,” the statement by the Central Bank of Kenya said.
Kenya’s apex bank has been very committed to its oversight functions, particularly with regards to regulating the country’s forex market. This is especially important at a time when the local currency (the shilling) has been under pressure due to dollar shortage.
Recall that Ecobank Transnational Incorporated (ETI) entered the Kenyan banking industry in 2008 through the initial acquisition of 75% stake in EABS Bank. Shortly after the acquisition, the bank’s name was changed to Ecobank Kenya Limited. ETI has since increased its stakeholding to 95.67%.