Sri Lanka Central Bank to implement FX Global Code

The Central Bank (CB) has announced plans to bolster the integrity and functionality of the domestic foreign exchange market by implementing the FX Global Code (FXGC) by year-end. 

In collaboration with the ACI Financial Markets Association and market participants, the CB aims to establish a framework that fosters a robust, fair, and transparent market.

The FX Global Code, established in 2017 through a collaborative effort between central banks and market participants, outlines principles of good practice in the foreign exchange (FX) market. 

These principles cover various aspects including ethics, governance, execution, risk management, and compliance, aimed at ensuring the effective functioning of the wholesale FX market.

By adhering to the FXGC, the CB seeks to promote a market environment where diverse participants can transact confidently at competitive prices, aligning with acceptable standards of behavior. The code, recently reviewed in 2021, is designed to adapt to evolving market dynamics.

Underpinning this initiative is the CB's commitment to maintaining a flexible exchange rate regime, which is expected to support trade competitiveness, external sector stability, and medium-term economic stability. By allowing market-determined exchange rates, the CB aims to mitigate past biases and speculative pressures while fostering a more stable exchange rate environment.