BSP further eases forex rules

11th wave of game-changing reforms

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) yesterday launched its 11th wave of foreign exchange liberalization measures as part of the ongoing game-changing financial sector reforms.

BSP officer-in-charge Diwa Guinigundo said the new measures are in line with the central bank’s thrust to further liberalize foreign exchange rules, while maintaining a safe and sound financial system, a stable foreign exchange market, and an appropriate monetary policy.

Guinigundo said the regulator has liberalized the conversion of foreign currency loans granted by banks to peso loans and the transfer of such loans as well as real and other properties Acquired to the books of the regular banking unit from banks’ foreign currency deposit unit (FCDU) books.

“Thus, these transactions no longer require prior BSP approval under certain conditions which seek to ensure that banks fully understand the nature and extent of the risks involved and that they have put in place appropriate business policies and risk management systems to manage these transactions,” he said.

The registration of foreign investments in the country remain optional, but registration allows foreign investors to acquire dollars from authorized agent banks and send the money back to their home country.

The regulator also mandates the registration of foreign currency-denominated borrowings to help the BSP manage the country’s debt profile.

The BSP under Governor Nestor Espenilla Jr. has been pursuing bold financial sector reform agenda includes ambitious foreign exchange reforms toward a more organized market that supports a flexible and market-determined exchange rate.

The series of liberalization has been aimed at reducing the cost of doing business, improving data capture, and channeling of foreign exchange to formal mechanisms instead of the black market.

The regulator has been enhancing governance and oversight over the foreign exchange markets to further improve transparency, price discovery, and market conduct.

Just last December, the BSP waived the approval requirement for purely private sector loans or those without guarantee from or exposure of any public sector entity to further open up the economy through a more liberal policy framework.

However, the said loans need to be registered as the central bank opened a temporary window for six months to allow the private sector that obtained loans without the required BSP approval.

In the 1990s, the then Central Bank of the Philippines started liberalizing its foreign exchange regulations and actively carried out 10 waves of foreign exchange liberalization reforms starting in 2007.

These include reforms pertaining to current and capital account transactions, and prudential regulations in order to promote more disciplined macroeconomic policies, greater financial depth, technological transfer, and institutional development.

The reforms were also instituted to make the country more responsive to the needs of increasing integration with global markets.

A forex trader said the recent wave of reforms has benefited the country as the relaxed foreign exchange regulations facilitated a much easier flow of funds to the country.

The trader pointed out greater foreign exchange transactions beefed up the country’s healthy payments positions to help survive external shocks arising from strong capital outflows amid the series of rate hikes by the US Federal Reserve.

Another trader said the easing of foreign exchange transactions would help facilitate the funding of priority programs such as the Duterte administration’s Build Build Build program which is critical to sustaining the economic growth momentum.

The peso yesterday shed six centavos to close at 52.33 to $1 from Thursday’s 52.27 to $1 as the market continues to digest the decision of the BSP’s Monetary Board last May 10 to lift benchmark rates by 25 basis points.

It hit an intraday high of P52.27 before losing steam to reach an intraday low of P52.36. Volume was steady at $690.8 million from $687.8 million last Thursday.