Authorised Dealer Banks (ADBs) are conforming to the revised guidelines for foreign exchange trading issued by the Reserve Bank of Malawi (RBM) at the end of July, Business News has observed.
Among others, the new guidelines entail that the spread between buying and selling exchange rates shall not exceed K5 for all trading currencies at any point.
The guidelines, which in the meantime only apply to ADBs, intend to instill a set of best practices in the trading of foreign exchange to promote practices that enhance market efficiencies and transparency.
RBM said the guidelines have come in the wake of an evolution of the country’s liberalisation process, which requires clear and transparent guidelines to guide the business at individual and institutional levels.
Official buying and selling rates of the kwacha against major foreign currencies as quoted on Monday show that all banks were adhering to the spread between buying and selling rates.
For instance, Standard Bank, according to the published rates, was buying a dollar at K537.77 and selling it at K542.76, representing a spread of K4.99 while Malawi Savings Bank (MSB) was buying a dollar at K535.07 and selling it at K540.03.
National Bank of Malawi, according to the published rates, was buying a dollar at K535.06 and was selling it at K540.06 while Indebank Limited bought a dollar at K535.06 and also sold it at K540.06. On the black market, the kwacha is trading at around K540 to a dollar.
Business News observation also shows that the spread between buying and selling rates for other convertibles such as British pound, South African rand and euro is also below K5 as stipulated by the new RBM guidelines.
On Tuesday, RBM spokesperson Mbane Ngwira said the guidelines are self regulating and will bring sanity and efficiency in the foreign exchange market.
University of Malawi’s Chancellor College economics professor Ben Kaluwa said banks were making huge profits out of foreign exchange business while concentrating less on their core business of lending.