Ethiopia's central bank told commercial lenders to stop charging most foreign-exchange fees as it pushes ahead with reforms after allowing its currency to float. The birr has depreciated by as much as 50 percent against major currencies since the policy shift.
The National Bank of Ethiopia (NBE) directed banks to end commissions and levies when selling hard currency to customers, except for nominal charges tied to letters of credit and other payment modes, according to the August 2 letter signed by Yenehasab Tadesse, director of foreign currency and reserve management. Any percentage-based fees must now be factored into buy-sell spreads.
The directives aim to bring more transparency to how lenders price cross-border transactions. The central bank's board approved the regulatory changes on August 1 after discussing ways to ensure competitive dynamics in the foreign-exchange market.
While spreads will be set freely, the NBE expects no collusion to distort quotes, said the letter. Ethiopia is overhauling its monetary framework to avert its balance of payments deficit and promote exports. The fee ban takes effect August 3 and banks must strictly adhere to the new policy.
The revamp could help reduce exchange costs and facilitate more trade and investment by giving clients better visibility into prices. Still, adjusting to the guidelines will be a challenge for lenders used to charging supplementary fees.
