Big banks to blame for falling shilling

June 23, 2011 9:19 am

, NAIROBI, Kenya, Jun 23- The Central Bank of Kenya is on Thursday afternoon expected to announce regulatory sanctions against three major commercial banks accused of being partly responsible for the plummeting shilling.

An audit carried out by the Central Bank revealed that the three institutions had forex transactions worth Sh22 billion last week as speculation helped to further put the shilling under pressure.

Central Bank regulations dictate that all authorised foreign exchange dealers should not trade in excess of Sh9 billion in one trade without notifying the regulator for necessary cushioning.

Governor Prof Njuguna Ndung’u is expected to brief the media on the action CBK will take against the speculators although the feeling on the ground is that this is coming a little too late.

 Locally, the Kenya Commercial Bank, Barclays, Standard Chartered, Citi , CFC and Commercial Bank of Africa are the six largest forex traders in the market.

 This action comes a day after an economist challenged the Central Bank to send a signal to the market that would reverse the downward spiral.

 The local currency has sustained a downward spiral reaching the Sh91.70 levels
which is the lowest it has hit in 17 years.

Standard Chartered Bank Head of Regional Research for Africa Razia Khan opined that CBK will have to take an aggressive policy response to stabilise the currency.

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