Definitions

  • Foreign Exchange Market: A market where foreign currencies are bought and sold.
  • Forex Bureau: An entity authorized by the National Bank of Ethiopia (NBE) to conduct foreign exchange transactions, either as a specialized window of a bank or as an independent company.

Types of Forex Bureaus

  • Bank-Affiliated Forex Bureaus: Operate as a part of a bank.
  • Independent Forex Bureaus: Separate entities licensed by the NBE to conduct foreign exchange transactions.

Operations and Transactions

  • Spot Transactions: Forex bureaus primarily engage in spot transactions, where currencies are bought or sold for immediate delivery.
  • Exchange Rates: Bureaus must display their buying and selling rates publicly and sell or buy currencies at the displayed rates before any changes.
  • Security Measures: Forex bureaus are required to implement security measures to prevent fraud and counterfeit currency.
  • Reporting: All transactions must be recorded using NBE-authorized forms.

Formation Requirements

  • Capital Requirements: Independent forex bureaus must meet a minimum capital requirement of Birr 15 million.
  • Security Deposit: A security deposit of Birr 30 million must be placed in a blocked account.
  • Insurance: Sufficient insurance coverage is required to protect against losses.
  • Ownership: Independent bureaus must be owned by Ethiopian nationals, non-resident Ethiopians, or foreign citizens of Ethiopian origin.

Security Requirements

  • Physical Security: Bureaus must have secure premises, CCTV surveillance, fire safety measures, and strong safes.
  • Staff Integrity: Bureau staff must be honest, credible, and competent, with no history of fraud or corruption.
  • Separate Location: Independent bureaus must operate from a separate location outside the bank's premises.

Conclusion

Ethiopia's foreign exchange market liberalization has opened doors for both bank-affiliated and independent forex bureaus. The directive's focus on security, transparency, and accountability aims to foster a more efficient and competitive foreign exchange market.