The Chartered Bank Nigeria PLC is to refund about N1.7 billion to the Central Bank of Nigeria (CBN) for alleged “irresponsible market behaviour” involving a $48.6 million foreign exchange deal.
The bank is to make the refund, being excess profit made from the sale of $48.6 million to a foreign customer above the inter-bank market exchange rate agreed by all operators and approved by the CBN.
The deal, which came in three tranches of $13.2 million, $10.4 million and $25 million each, was exchanged by Standard Chartered Bank at about N380 to the dollar, instead of a maximum of N345 to the dollar agreed by all banks and approved by the CBN.
Following the introduction of the flexible exchange rate policy by the Central Bank, replacing the previous N197-N199 per dollar exchange rate, the banks were said to have agreed on a fresh exchange rate in an attempt to strengthen the Naira, which was depreciating at an alarming rate.
To bridge the widening gap between the inter-bank and parallel market exchange rates by the bureau de change operators, the banks resolved to set an exchange rate band, initially, between N305 and N315 to the dollar, within which they would compete and trade.
A senior official in one of the banks told PREMIUM TIMES the band was later reviewed to between N315 and N345, when the Naira value plunged further, with an agreement that any bank seeking to sell above the range must inform the CBN and obtain clearance to proceed.
The official, who requested his identity not be revealed because of the sensitivity of the information, said the clearance was necessary, particularly with foreigners coming into the country, to enable the CBN be aware of the transaction and why it had to be at that high rate.
He said no fewer than eight banks that had reason to trade above the agreed N315 exchange rate range, sought and received the CBN’s nod to proceed with their transactions.
Surprisingly, the official said, Standard Chartered Bank, whose top officials were part of the understanding on the exchange rate range, opted to ignore the agreement when it received a request from one of its foreign clients to bring in about $48.6 million into the country.
Rather than trading within the agreed exchange rate band of N315-N345 to the dollar, Standard Chartered Bank was accused of trading at the rate of N380 to the dollar.
Consequently, the bank realized about N18.5 billion, about N1.7 billion in excess of the maximum N16.8 billion it should have made, if it traded within the agreed exchange rate band with a maximum of N345 to the dollar.
“Every market has written and unwritten rules guiding the conduct of operators. In this case, it was a resolution by all of us that the CBN must be carried along in such transactions. If other banks complied and got the CBN nod to proceed, it was sabotage and a breach of the market rules for Standard Chartered to have gone ahead without the CBN nod,” the official explained.
CBN spokesperson, Isaac Okorafor, declined to give specific details on the transaction.
“Let me clarify that Standard Chartered Bank was neither sanctioned nor fined for any FOREX round-tripping offences,” he said. “In as much as the CBN would not want to be seen joining issues with any bank on any issue, it will not condone any irresponsible market behaviour.”
Mr. Okorafor refused to give further details on the “irresponsible market behaviour”. He, however, said the Central Bank has already written to inform the bank that the full value of the excess amount realized outside the agreed exchange rate band would be recovered from its account.
Standard Chartered Bank spokesperson, Dayo Aderugbo, also refused to give details of the alleged offence the bank was accused of. He neither denied nor confirmed if the bank was sanctioned or fined by the Central Bank for the Forex offences.
“Standard Chartered is committed to complying with all local laws and regulations,” Mr. Aderugbo said in a terse response to a mail by PREMIUM TIMES requesting the bank’s clarification on some of the issues.
“We continue to engage with the Central Bank of Nigeria officials on this matter in an effort to reach an amicable resolution. I appreciate your interest, but given we are still in consultation with the regulator, I am sure you can empathize it’s not suitable for us to comment further at this point in time,” he stated