BSP to liberalize forex rules to facilitate investments

Lawrence Agcaoili - The Philippine Star
BSP to liberalize forex rules to facilitate investments
BSP Governor Nestor Espenilla Jr. said the regulator has circulated a draft exposure on the planned relaxation of the foreign exchange rules to facilitate the movement of foreign investments.

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is set to further ease the rules on foreign currency trading to make it easy for foreign investments to come in and out of the country.

BSP Governor Nestor Espenilla Jr. said the regulator has circulated a draft exposure on the planned relaxation of the foreign exchange rules to facilitate the movement of foreign investments.

“We are not done yet. It is about further liberalization of investment rules,” he said.

Espenilla said the proposed easing would involve simplifying the movement of foreign investments in the country.

“We want to make it easy for investments to come in, and also for investments to go out, legitimate investments. So both sides,” he said.

Latest data from the central bank showed foreign direct investment (FDI) inflows jumped 43.5 percent to $2.2 billon in the first quarter of the year from $1.5 billion in the same quarter last year on the continued positive outlook on the Philippine economy amid the sound macroeconomic fundamentals and robust growth prospects.

Likewise, foreign portfolio investments or hot money yielded a net inflow of $1.2 billion in the first four months of the year, reversing the $644.3 million net outflow registered in the same period last year.

The BSP chief said the additional relaxation would be patterned after that of external debt approved last December, wherein the BSP waived the approval requirement for purely private sector loans or those without guarantee from or exposure of any public sector entity.

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

“Basically it is similar to what we did for external debt,” Espenilla said.

Just last month, the BSP’s Monetary Board 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.

Under the approved rules, the conversion no longer require prior BSP approval under certain conditions to ensure that banks fully understand the nature and extent of the risks involved and must put in place appropriate business policies and risk management systems to manage such transactions.

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

The BSP has so far implemented 11 waves of foreign exchange liberalization measures as part of the ongoing game-changing financial sector reforms.

The BSP has been pursuing a bold financial sector reform agenda which 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 BSP has been enhancing governance and oversight over the foreign exchange markets to further improve transparency, price discovery, and market conduct.

In the 1990s, the then Central Bank of the Philippines (CBP) 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 undertaken to make the country more responsive to the needs of increasing integration with global markets.




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