Money Exchange Units Banned From Selling Foreign Currency
Source: Vientiane Times
Money exchange units that represent commercial banks are now prohibited from selling foreign currency, according to the Bank of the Lao PDR.
Became effective on October 11, the ban supports the government’s attempts to give commercial banks a greater role in the purchase and sale of foreign currencies, while limiting the role of money exchange units in currency trading.
Under the new policy, money changers will be allowed to buy foreign currencies from customers but are forbidden to sell currencies other than kip.
This is the latest step taken by the central bank to regulate foreign currencies amid the continuing depreciation of the kip, which has driven up inflation and severely affected the economy.
According to a two-page Decision issued by the Bank of the Lao PDR, money exchange units that represent banks may buy US dollars at rates within a +3/-3 percent range compared to the reference rate issued by the central bank.
The purchase rate for other currencies should not exceed the rate issued by the commercial banks they are associated with.
In addition, banks are permitted to set the kip/US dollar exchange rate in a range not exceeding +4.5/-4.5 percent compared to the reference rate issued daily by the central bank’s Monetary Policy Department.
However, the difference between the kip vis-a-vis the US dollar, baht, yuan and euro purchasing and sale rates must not exceed 1 percent.
According to the BOL, banks and money changers must report their exchange rates in the media and to the central bank using platforms such as their own website.
Commercial banks are obliged to report the performance of their exchange rates and those of their representative money-changing units to the central bank by 4pm on each official working day. The report must include the overall value of the currency traded and the value of each currency traded.
The central bank’s Monetary Policy Department will issue the kip/US dollar reference rate on each official working day at 8:10am on the BOL’s website.
This will be used by commercial banks and their representative exchange units to set their own exchange rates.
In June this year, the Bank of the Lao PDR placed restrictions on currency exchange units, allowing them to change money only for individuals and tourists, up to a maximum of 15 million kip per person per day.
Money changers are banned from trading in foreign currencies with organisations and companies. Currently, only commercial banks are authorised to buy and sell foreign currencies with importers, exporters, investors and other legal entities.