Bank of Tanzania has suspended five commercial banks from trading in the interbank forex exchange market (IFEM) for a month, as part of its ongoing regulatory measures to subdue irregular FX practices and money laundering.
The move by the Tanzania’s bank regulator follows recent market spectacle that saw government army officers surround and lock offices of major FX bureaus a week ago in Arusha.
Alexander Ng’winamila, the BOT director of Financial Markets confirmed that Barclays Bank Tanzania, Exim Bank, UBA Bank, BancABC and Azania Bank were all suspended from the market for one month.
“The suspended banks violated some provisions of the code of conduct.They either traded at off market rates and/or did not submit to the central bank the transactions they made…contrary to
the requirements of the code of conduct,” Mr Ng’winamila told Financial Times.
Stanley Kafu, the head of Marketing and Communications at Exim Bank confirmed the suspension stating: “We were informed that the action was taken because there were delays in our part in reporting to the BOT some transactions we did on the IFEM.However, our temporary suspension on the IFEM only applies to US dollars and shillings.”
Nonetheless, the five banks can trade in other currencies as the suspension only applies to dollars and shillings.
This temporary freeze is part of a crackdown seen to ensuring stability in the currency shilling and prevent distortion in local foreign exchange market.
The shilling had crossed the Tsh2300 mark against the dollar in the past few weeks raising concerns that the local currency could slide due to unexpected shortages of hard currency into the market.
Furthermore, the pressure on the shilling is likely to intensify should there be a slow down of the US-dollar inflows from financial aid, mining and agriculture in the coming weeks due to several factors.
In 2017, President John Magufuli had ordered the Central Bank to increase regulations of the movement of hard currency in a move aimed at protecting the local currency from volatility.
