Aleem Khan

The Cen­tral Bank of T&T has an­nounced ma­jor changes to the way US dol­lars are re­leased in­to the bank­ing sys­tem. The change, which took ef­fect yes­ter­day, has, so far, on­ly been made to for­eign ex­change (forex) traders pri­vate­ly. The T&T Guardian gleaned the in­for­ma­tion from the RBC Caribbean Eco­nom­ic Re­port re­leased March 30.

"Go­ing for­ward, 90 per cent of the in­jec­tions of US dol­lars from the Cen­tral Bank will now be auc­tioned amongst 12 li­censed for­eign ex­change deal­ers, where­as rough­ly half would have been auc­tioned pre­vi­ous­ly amongst com­mer­cial banks," RBC Group Econ­o­mist Mar­la Dukha­ran said in the re­port.

There will now be no lim­it on the amount that can be al­lo­cat­ed to any one bid­der for these auc­tioned funds, while pre­vi­ous­ly these funds would have been al­lo­cat­ed among com­mer­cial banks ac­cord­ing to their mar­ket share, she said. The max­i­mum price a forex deal­er can bid will con­tin­ue to be the cur­rent sell price.

The re­main­ing 10 per cent of the in­jec­tion will be al­lo­cat­ed equal­ly among the 12 deal­ers at a price de­ter­mined by the Cen­tral Bank, as op­posed to the for­mer al­lo­ca­tion among com­mer­cial banks based on their mar­ket share, the re­port said.The Tier 1 sys­tem–where the US dol­lar sup­ply from three large en­er­gy com­pa­nies, Petrotrin, NGC and PCS Ni­tro­gen, was pre­vi­ous­ly al­lo­cat­ed to com­mer­cial banks ac­cord­ing to mar­ket share–has al­so been changed.

The orig­i­nat­ing in­sti­tu­tion–the one to which the US dol­lars are sold by the en­er­gy com­pa­ny–will keep 25 per cent of these funds, and the re­main­ing 75 per cent will now be shared equal­ly among the re­main­ing eleven deal­ers.The Cen­tral Bank has al­so an­nounced that it will not sup­port the Tier 2 arrange­ment go­ing for­ward. Un­der the Tier 2 sys­tem, US dol­lars from sev­er­al oth­er en­er­gy com­pa­nies and ex­porters would have been al­lo­cat­ed among com­mer­cial banks ac­cord­ing to mar­ket share.

Dukha­ran said: "This new ap­proach does not ar­tic­u­late any changes to the sup­ply of US dol­lars com­ing to the mar­ket."