Central bank suspends licensing of new forex bureaus

The National Bank of Rwanda has announced indefinite suspension of licensing of new forex bureaus, in a move the bank said would ensure a vibrant and dynamic foreign exchange market in line with current economic developments. The suspension takes immediate effect, according to a statement dated March 22 issued by John Rwangombwa, the Governor of the National Bank of Rwanda. This means that over the freeze period, there will be no new entrants into foreign exchange market till the suspension is lifted. The central bank also reviewed the forex bureaus regulatory framework, tightening operating conditions for the operators. Among the new changes is the increase of the minimum operating capital of bureaus from Rwf 20million to Rwf 50million. Other changes touch on bureaus’ staff skills, qualifications and experience. Forex bureaus will also be required to have Management Information system tools and modern equipment mandatory for effective conduct as well as provisions allowing clients to transact through their accounts for the implementation of cashless policies. This will however not apply to instances of mergers, acquisitions, takeovers of existing forex bureaus, according to the statement. The move will also not affect the expansion processes of existing forex bureaus as they open up branches. The central bank maintains that the move is aimed at enhancing professionalism in the foreign exchange sector while ensuring best practices in regard with national policies to combat money laundering and terrorist financing. Experts say that the new measures rolled out by the central bank will have more effect on businesses operating solely as currency exchange and less effect on banks’ forex services. This is because banks can easily meet the financing, staff and equipment requirements whereas their competitors operating solely currency exchange business will have to incur extra costs amid slim profits. Others interpreted the directive as aimed at ridding the market off speculators who have previously been accused of hoarding dollars and other foreign currency to earn abnormal profits. By hoarding the foreign currencies, money changers create shortage of dollars, consequently driving up the exchange rates. The suspension of licensing of new forex bureaus comes weeks after the central bank froze the licensing of new insurance firms entering the Rwandan market. The bank said that the move was aimed at ensuring stability and integrity of the financial sector.

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Central bank suspends licensing of new forex bureaus