The Bank of Zambia (BoZ) will at its discretion trade any amount of foreign currency beyond the marketable threshold on a two-way quote submitted by the commercial banks at any time.
This is contained in a letter signed by the BOZ deputy governor Bwalya Ng’andu made available to the Daily Nations and addressed to all Heads of commercial banks.
Dr Ng’andu said in order to improve stability and transparency in the foreign exchange market, the BoZ had come up with measures to be applied by all commercial banks with immediate effect.
“All commercial banks should to be updating their board rates aligned to the interbank exchange rates as a way of improving stability and transparency in the foreign exchange market. This is aimed at enhancing levels of transparency will add to the efficiency of price discovery in the market and assist stability efforts,” he said.
Dr Ng’andu said individual commercial banks exchange rates submitted to the central bank shall now be published on both Reuters information system and the BOZ website by 09;30 hours, 12;30 and 15;30 hours.
He also said the information may also be published on any other media platforms as deemed fit by BOZ. “Commercial banks are required to update their board exchange rates at 09;30 hours, 12;30 and 15;30 hours and these rates should be consistent with interbank exchange rates submitted to the BOZ at these time intervals. The board rates should be aligned to the interbank exchange rates in such a way that the rates for the wholesale market fall within the board exchange rates,” Dr Ng’ambi said.
He however said the commercial banks still remained at liberty to the board rates at any other time as they saw fit. He said non-compliance with the directives would be deemed to be unsafe and unsound banking practices and shall attract supervisory action as envisaged under the Banking and Financial Service Act.