Kenyan rogue banks and bankers in spotlight for fixing US dollar prices

NAIROBI, Kenya - A number of undisclosed banks in Kenya are under investigation by the Competition Authority of Kenya (CAK) for allegedly fixing foreign exchange trades, adding a fresh twist to the crisis that has seen lenders run out of dollars on some days.

CAK reveals that the investigations are ongoing into the possible manipulation and collusion over the dollar exchange rate, exposing bankers to fines and up to five years in jail if convicted.

Reliable sources say that CAK is pursuing allegations that some dealers at the banks used electronic chat rooms and instant messaging to coordinate their trading activities when giving quotes to customers who buy or sell currencies.

According to CAK files, the investigation was initiated a mid-last year and comes amid the weakening of the shilling against the US dollar and the continued widening of the spread between the official and open market rates.

The agency while answering questions raised by local media, CAK added that “Our investigation is ongoing and, therefore, we cannot divulge or discuss the specifics of the matter. However, the Authority is engaging the relevant stakeholders, and the applicable remedies shall be as defined in the Competition Act, upon the conclusion of the investigation.”

Restrictive trade practices include direct or indirect fixing of purchase or selling prices or any other trading conditions.

Other violations that would amount to restrictive trade practices in line with the Competition Act are the maintenance of a minimum resale price.
The CAK investigation will also seek to uncover whether banks through their industry lobby— the Kenya Bankers Association (KBA) —would have influenced prices to be charged for foreign exchange-related transactions and terms of sale.

The dollar shortage has become an issue of national concern due to the secondary effect of rising consumer prices and potential supply hitches of key imported commodities.
A black market was also emerging in the wake of banks buying the dollars at less than KSH 130 and selling the US currency at over KSH140.

Those with dollars are finding they can get a better rate by bypassing banks and selling directly to individuals and firms in need. The firms are buying the US currency at lower rates than those quoted by the banks.

Last month, the government in partnership with the central bank sought to revive the interbank foreign exchange market as part of efforts to fix the currency woes.

The interbank market for the hard currency has been dormant in recent years due to what traders said was aggressive policing by the central bank, which made it difficult to do deals.

Central Bank Governor Patrick Njoroge has repeatedly denied undue interference in the market, saying the regulator was merely playing its role of enforcing discipline.

The lack of a vibrant interbank foreign exchange market has partly been blamed for a biting shortage of hard currency that has even forced the government to seek longer credit periods for essential imports such as petrol.

The shilling was on Wednesday this week exchanged at an average of KSH 133 units against the US dollar, having depreciated from KSH 104 at the end of March 2020.

GAROWE ONLINE