BB orders all scheduled banks to shift FX transactions to new system

Bangladesh Bank has instructed all scheduled banks to use its new Foreign Exchange Market (FXM) system for reporting and conducting foreign currency transactions from September, including interbank deals, central bank FX auctions and customer-level transactions.

The central bank issued the directive in a circular on Monday, August 31, through its Foreign Exchange Reserve and Treasury Management Department.

According to the circular, Bangladesh Bank has introduced the FXM system to facilitate and report foreign exchange auctions, interbank transactions and customer-level FX dealings. These activities were previously handled manually but will now be conducted through the new platform.

The FXM system will be used for Bangladesh Bank’s interventionist FX auctions, interbank foreign currency transactions, and the collection and reporting of foreign exchange market data. Spot, forward and swap transactions in the interbank market will also be processed through the system.

For Bangladesh Bank auctions, banks will be able to submit buy or sell orders through the FXM within the stipulated time. Auction results and allocations will also be communicated through the platform, followed by settlement of the relevant foreign currency and taka.

For interbank transactions, the selling bank will place an order through the FXM, which the buying bank will accept. Settlement of the foreign currency and taka will subsequently be completed through the back offices of the two banks.

For swap transactions, both the near-leg and far-leg settlements will have to be processed through the FXM.

The circular also requires banks to submit customer-level foreign exchange transaction data three times each working day to facilitate market monitoring and the preparation of reference exchange rates.

Banks must submit details of transactions conducted up to 11am by 11:30AM, while transactions conducted up to 4pm must be reported by 4:30PM. Transactions carried out after 4PMm can be reported by 11AM on the following working day.

Even if a bank has no reportable FX transactions during a specified reporting period, it must submit a zero report through the FXM.

For the preparation of reference exchange rates, banks will generally be required to report customer-level transactions involving $100,000 or more. However, for remittances related to expatriate earnings or wages, reporting will be mandatory regardless of the transaction amount.

Banks can submit reports through the FXM either by uploading Excel files in the prescribed format or by entering individual transaction details directly into the system. After submission, an authorised bank official must verify and approve the information.

Bangladesh Bank said the new system would make foreign exchange market transactions more transparent, faster, orderly and accurate. It is also expected to strengthen transaction monitoring, reporting, data preservation and auditing while reducing manual work and processing time.

The central bank has also issued separate operating guidelines for bank officials to facilitate the use of the FXM system.