Subject to this general objective, the conduct of exchange rate policy is guided by three major purposes: first, to reduce excess volatility in exchange rates, while ensuring that the movements are orderly and calibrated; second, to help maintain an adequate level of foreign exchange reserves and third, to help eliminate market constraints with a view to the development of a healthy foreign exchange market.
The main problem is the compliance workload – that is, the work involved in meeting the requirements and demonstrating that they’ve been met. Therefore, the rules could act as an additional handicap for small banks that are already under pressure from many sides. Take the rapid digitalisation of banking, for example, or the lowinterest-rate environment.