CBK sanctions Ecobank over irregular FX trade

In a statement on Monday, the reserve bank said Ecobank failed to sufficiently put in place robust risk controls to prevent breaches to its foreign exchange exposure limits on a specific trade earlier this month.

Consequently, the CBK has frozen Ecobank’s foreign exchange transactions for a week to April 4 including a suspension from the interbank foreign exchange market to allow the bank to put in a remedial plan.

Ecobank is also expected to reverse the amount of additional exposure created by the regulatory breach.

The sanctions are aligned with CBK’s goal of building a fair and transparent financial market.

In April 2020, Absa Bank Kenya was the subject of similar sanctions having failed to heed to standard checks on authenticating FX trade.

The bank was forced to cancel two foreign exchange forward transactions in the aftermath of sanctioning to comply with CBK's benchmark regulations.

Absa’s sanction came during a window when the CBK was directly buying dollars from the money markets to boost its official reserves.

On the flipside, the indictment of Ecobank is on the backdrop of sustained weakness in the Kenya shilling which has been primarily tied to a strengthening US dollar relative to other world currencies and a greater demand for the greenbuck.

The Kenyan shilling was quoted at Ksh.114.81 near the end of trading on Monday against the US dollar having shed 1.43 per cent of its value in the year to date.