BSP streamlines hedging facility

MANILA, Philippines — The Bangko Sentral ng Pilipinas is keen on relieving some pressures in the forex spot market amid roiling headwinds, streamlining improvements in its currency rate risk protection program.

In a statement on Tuesday, the Monetary Board greenlit amendments and widened the coverage of the Currency Rate Risk Protection Program (CRPP). This facility offers an option for bank clients to hedge their foreign currency transactions through a non-deliveralbe dollar/peso forward contract (NDF) between the BSP and a universal or commercial bank.

The BSP hoped this would provide some wiggle room for banking clients, as the local unit’s weakness in 2022 pulled back some of the domestic economy’s gains. 

As it is, the changes include aligning document requirements with exisiting regulations on foreign exchange maket (FX) transactions. The BSP also removed notarial rules to hasten transactions.

Likewise, non-trade transactions and investments from original trade-related coverage are now eligible to use the CRPP facility. 

Rounding out the list of changes are applicable US dollar interest rate used to compute for the NDF rate, abolishing the 1-2pm trading window, and the change in maximum tenor, the BSP said.

“The CRPP had to be revamped to increase its availability to banking clients. We did this by streamlining and easing the requirements and expanding the coverage of eligible FX transactions,” BSP Governor Felipe Medalla said. — Ramon Royandoyan