Top bankers meet today to set benchmark for forex quotes

Siddique Islam Top bankers sit today (Monday) to review the country's foreign exchange market situation after the central bank warned of intervention if the dealers fail to maintain a benchmark for dealing with overseas exchange houses. The "special" meeting is convened as the Bangladesh Bank has raised its concern over continuous weakening of Taka against foreign currencies, saying some banks are contributing to the situation by engaging in unhealthy practices. Market insiders said some banks are quoting high rates to the overseas exchange houses in a rat race to attract more remittance and these rates often exceeded the local inter-bank foreign exchange market by a wide margin. The Bangladesh Foreign Exchange Dealers' Association (BAFEDA), a grouping of 45 banks which trade forex in the local market, is hosting the meet to discuss the latest situation, a BAFEDA member said. "We'll talk about the BB instructions in this special meeting and try to find ways to set benchmark rates for doing business with the foreign exchange houses," the member told the FE Sunday. The BAFEDA has earlier asked all its member banks that while dealing with these exchange houses they should keep the quotes at least Tk 0.20 lower than the inter-bank buying and selling average unit rate. The apex body of the foreign exchange-dealer banks had set the benchmark rate to ensure healthy competition in the forex market, according to the BAFEDA member. "We'll submit a report in this connection to the central bank by October 12 (Wednesday) in line with the BB's verbal directives on Wednesday," he added. A senior private banker said the association is also mulling a raft of measures to make sure the forex market remains stable and all member-banks stay clear of unhealthy practices. "As part of the measures, the BAFEDA may closely monitor the rate, offered by the commercial banks to the overseas exchange houses, using its own mechanism," he told the FE. He also said reliance on the remittance department in setting the offer rates for the overseas exchange houses are partly to blame for the continuous weakening of Taka since last month. The Bangladeshi currency has depreciated against the US dollar by around one Taka in the last four weeks amid heightened concern of the country's balance of payment situation. "The remittance departments are neither equipped nor empowered to quote such rates. It is the job of the treasury to fix such rates, but their advice is often ignored," he said. He added that such practice has been causing exchange rate anomaly among banks as well as in the inter-bank foreign exchange market. The treasury official also said the banks should follow the central bank's core risk guidelines before offering such rates to the overseas exchange houses.