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CBN to Axe Banks for Round Tripping

Posted by By Kunle Aderinokun on 2004/11/26 | Views: 1391 |

CBN to Axe Banks for Round Tripping


Following recent discovery by the Central Bank of Nigeria (CBN) that some banks were resorting to foreign exchange malpractices in a desperate bid to meet the N25 billion capitalization, the apex bank has formally issued a stern warning to those involved to desist or face maximum sanctions.

Following recent discovery by the Central Bank of Nigeria (CBN) that some banks were resorting to foreign exchange malpractices in a desperate bid to meet the N25 billion capitalization, the apex bank has formally issued a stern warning to those involved to desist or face maximum sanctions.

The sanctions, according to the CBN, may include revocation of forex dealership licence of such banks as well as blacklisting of their chief executives officers.

In a circular with reference: TED/AD/133/2004, dated November 17, 2004 and addressed to all authorized forex dealers of banks, the apex bank stated, "This is to inform all Authorised Dealers that the Central Bank of Nigeria has obtained market information using the established market intelligence process that many banks are still engaging in foreign exchange malpractices including illegal dealing in the outlawed "free funds" market.

"This is a serious resurgence of the experience of the past, which had resulted in a serious drain on the level of scarce foreign exchange.

"We have noted persistent increase in the demand for foreign exchange even when accounts are not funded, spurious demand and the desperate efforts of some banks to improve their position as a result of the on-going consolidation exercise."

The CBN stated in the circular signed by Director, Trade and Exchange, Mrs. O.O. Akanji, that it "will not hesitate to impose appropriate sanctions, which include, but not limited to withdrawal of the dealer's licence of any bank found to have been involved in foreign exchange infractions. The chief executives of such institutions may also be sanctioned and blacklisted."

The CBN therefore advised banks to comply fully with all regulations in the foreign exchange market and desist from all forms of foreign exchange malpractices.

The CBN Governor, Professor Charles Soludo, had last Thursday alleged that banks were engaging in foreign exchange round tripping and other unwholesome practices in their 'desperate' bid to meet the N25 billion capitalization target.

Soludo who declined to mention names of the erring banks, warned that, if caught, such banks will have their forex dealership licences revoked.

Soludo at the fourth Annual Monetary Policy Conference, Abuja had said, "we've gotten some reports, some disturbing signals of some banks and I will say some probably minority of banks that have begun a little bit much more desperate with a bid to want to make it alone or so and consequently engaging in some kinds of unwholesome practices including foreign exchange round tripping."

"And I must say it very, very seriously, we are going to take very, very stringent measures once we are able to pin down any one of them. We are going to invoke the rules including the revocation of the foreign exchange dealership licences of any bank that we find infringing. Our people will soon be in the banks to examine them and any banks we find offending this particular rule, we'll have to apply the maximum sanction. This will not be tolerated in any way or shape," he had said.

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