Cbn Issues New Rules For Forex Trading, To Suspend Defaulting Banks For Eight Weeks
SAN FRANCISCO, February 02, (THEWILL) – The Central Bank of Nigeria (CBN) has issued new guidelines on foreign exchange (forex) trading among banks and other authorised dealers.
The rules released by the Financial Market Department of the apex bank stipulates that defaulting banks risk eight weeks suspension,
The bank noted that the new rules which go into effect immediately are meant to prevent an abuse of forex transaction rates by lenders.
The circular titled: 'Amendment of S4 Business Rules and Guidelines', states that with reference to section 10.1 of the S4 Business Rules and Guidelines, any auction or two-way transaction quote with the CBN must be settled.
“If the transaction is on queue, it shall be given highest priority and when it fails to settle, the system shall generate an automatic Intra-day Liquidity Facility (ILF) backed by collateral to settle the transaction,” the circular said.
“Where there are no securities, the allotment shall be cancelled and the defaulter suspended from all auctions for eight weeks effective from the date of default.
“ILF shall be bought back or converted to Standing Lending Facility (SLF) by the participant by the close of business day, failing which it shall be automatically be converted to SLF at the prevailing SLF rate plus 500 basis points.
“If any SLF is not purchased by the participant by the next business day, such participant shall not be eligible to access the CBN discount window until such outstanding obligation is settled in accordance with Section 27 of the Guidelines for the Conduct of Repurchase Transactions under the CBN Standing Facilities.
“All Standing Lending Facilities (SLF) must be bought back latest by 10 am on the maturity date, failing which encumbered securities would be automatically rediscounted.”