Thursday, February 1, 2024 – The CBN has issued a new circular on reporting foreign currency exposure to all banks to curb forex speculation & risk mitigation.
In several guidelines, the Central Bank seeks to address
suspected cases of excessive foreign currency speculation while highlighting
its concerns over the growing trend of banks holding large foreign currency
positions.
“The CBN has noted with concern the growth in foreign
currency exposures of banks through their Net Open Position (NOP).”
“This has created an incentive for banks to hold excess long
foreign currency positions, which exposes banks to foreign exchange & other
risks.”
The circular instructed the banks that the NOP limit of the
overall foreign currency assets & liabilities, taking into cognizance both
those on & off-balance sheet, should not exceed 20% short or 0% long of
shareholders’ funds unimpaired by losses using the gross aggregate method.
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