The National Bank of Ethiopia (NBE) has mandated financial institutions in the country to separately include their forex trading spreads in their daily posted rates to enable transparency.
- The forex trading spread is the difference between a bank’s buying and selling rate for a foreign currency and should not exceed 2% for the posted rates.
- The Ethiopian apex bank has also required financial institutions to independently report and disclose forex-related fees and commissions to their clients.
- These FX fees shall also be regularly reported to the NBE for review and assessment.
“It is to be recalled that the National Bank previously required that banks include all FX related fees and commissions (except those charges set in nominal terms) in their trading spreads between the buying and selling rate,” NBE stated.
“However, based on lessons gained from experience and inputs received from the banking sector, it has now become important to review the earlier decision regarding the treatment of FX related spreads and fees,” NBE added.
The order is set to begin with immediate effect and no later than tomorrow. The most populous country in the region has been on a liberalization drive since the year began, with the NBE announcing a market-based FX regime in August this year.
Some of the policy changes that were instituted two months ago included allowing banks to buy and sell forex at their own negotiated rates, effectively relegating the NBE to the role of regulator.
