Regulatory Alerts2014-01-01
Guidance Note 2 of 2014 – Over-the-Counter Foreign Currency Cash Transaction Limits with Commercial Banks
The Bank of Zambia has issued this guidance to clarify and enforce daily over-the-counter foreign currency cash transaction limits for bureaux de change operating with commercial banks. Bureaux de change must ensure their aggregate daily cash purchases and withdrawals do not exceed the lower of US$100,000 or 70 percent of their regulatory capital, with a baseline US$5,000 daily cap for those without operational accounts. Failure to comply with these prescribed limits constitutes an unsafe and unsound practice, subjecting non-compliant entities to potential supervisory actions under the Banking and Financial Services Act.
[Logo] BANK OF ZAMBIA OFFICE OF THE DEPUTY GOVERNOR - ADMINISTRATION
February 6, 2014
To: CHIEF EXECUTIVES OF BUREAUX DE CHANGE AND COMMERCIAL BANKS
GUIDANCE NOTE NO. 2 OF 2014 - OVER THE COUNTER FOREIGN CURRENCY CASH TRANSACTIONS LIMITS WITH COMMERCIAL BANKS
1. Background
1.1 Pursuant to Regulations 6 and 7 of the Banking and Financial Services (Bureau de Change) Regulations of 2003, the Bank of Zambia (BoZ), vide NB Circular No. 02/2013, reviewed the bureau de change foreign exchange transaction limits in section 8 of NB Circular No. 06/2003.
1.2 Section 3 of NB Circular No. 02/2013 sets out a bureau de change's aggregate foreign currency cash transactions with commercial banks where it operates accounts and provides that these shall not exceed the lower of the equivalent of US$100,000 or 70 per cent of the bureau de change's regulatory capital per day. The regulatory capital to which the transaction limit shall be anchored shall be determined by the BoZ on a calendar quarter basis.
1.3 The Circular further provides that the aggregate over-the-counter foreign currency cash transaction limit at commercial banks where a bureau de change does not operate accounts shall not exceed the equivalent of US$5,000 per day.
Page 1 of 3 Bank Square, Cairo Road, P.O. Box 30080, Lusaka, Zambia. Tel: +260-211-229930 Fax: +260 211-222808 E-mail: tkmabula@boz.zm. Web: http://www.boz.zm
2. Interpretation of Over-the-Counter Foreign Currency Cash Transactions
2.1 The BoZ has observed a tendency by bureau de change to mis-interpret the provisions of NB Circular No. 2/2013 in order to circumvent its prescription by using their dollar accounts with commercial banks to withdraw amounts in foreign currency exceeding the limits prescribed in NB Circular No. 2/2013 referred above.
2.2 The BoZ hereby wishes to guide that a foreign currency cash withdrawal, just like a cash purchase of foreign currency is a foreign currency cash transaction with a commercial bank and therefore, subject to the over-the-counter foreign currency transaction limits prescribed in section 3 of NB Circular No. 2/2013. However, in cognizant of the fact that bureau de change's core business involves buying and selling of foreign currency, and in order not to hamper their operations, the BoZ has authorized bureau de change to exceed the US$5,000 limit for operational purposes provided that the aggregate foreign currency cash transaction (i.e., cash purchases from commercial banks plus cash withdrawals from operational accounts) does not exceed the lower of the equivalent of US$100,000 or 70 per cent of the bureau de change's regulatory capital per day.
3. Breach of Limits
3.1 Bureaux de change are reminded that an omission or failure to adhere to or comply with the over-the-counter foreign currency cash transaction limits with commercial banks constitutes an unsafe and unsound practice and may attract supervisory actions in terms of Section 77 of the Banking and Financial Services Act.
3.2 This Guidance Note is issued with the purpose of apprising bureau de change on their obligations with regard to compliance with over-the-counter foreign currency cash transaction limits with commercial banks.
3.3 In case of any query or clarification, kindly direct the same to:
Page 2 of 3 Bank Square, Cairo Road, P.O. Box 30080, Lusaka, Zambia. Tel: +260-211-229930 Fax: +260-211-222808 E-mail: tkmabula@boz.zm. Web: http://www.boz.zm
The Acting Director Non-Bank Financial Institutions Supervision Department Bank of Zambia P O Box 30080 LUSAKA Tel: +260 211 221746 Email: vmbuku@boz.zm
[Signature] Dr Tukiya Kankasa-Mabula DEPUTY GOVERNOR – ADMINISTRATION
Cc Deputy Governor – Operations Director – Bank Supervision Acting Director – Non-Bank Financial Institutions Supervision
Page 3 of 3 Bank Square, Cairo Road, P.O. Box 30080, Lusaka, Zambia. Tel: +260-211-229930 Fax: +260-211-222808 E-mail: tkmabula@boz.zm. Web: http://www.boz.zm