By Lee Chipongian
The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) approved another round of foreign exchange (FX) policy liberalization to give banks more access to FX resources.
“The reforms will give the investors greater flexibility to manage their investments and cash flows,” said the BSP in a statement. The seven-man Monetary Board – minus BSP Governor Nestor A. Espenilla Jr. who is in the US for medical treatment – held its regular and weekly meeting in Bacolod Friday. They were there for groundbreaking ceremonies of the future BSP office in the city and region.
The Monetary Board approved additional FX regulatory reforms which it said should “facilitate access to the banking system’s FX resources for legitimate transactions” as well as to “further streamline and simplify procedures and documentary requirements for FX transactions.”
The BSP noted that the new FX rules is intended to be “well-calibrated” and done in a “well-sequenced manner”.
“Notwithstanding the further liberalization of FX rules, the BSP maintains its ability to gather current, comparable and comprehensive data on FX transactions and adopts necessary prudential measures to address any perceived emerging concerns,” it added.
The FX policy changes are as follows:
*Further liberalized rules on inward investment and associated derivatives transactions by broadening the coverage of inward investment transactions, allowing registration of investments filed beyond the prescriptive period, expanding the definition of eligible banks that can register investments on behalf of BSP, streamlining processes and simplifying documentary requirements, and facilitating sale of FX relating to investments;
*Relaxed the rules on outward investments and associated derivatives transactions by expanding the coverage of outward investment transactions and lifting the prior BSP approval requirement for purchase of FX beyond the threshold amount, subject only to prior notification to the BSP;
*(BSP) allowed the submission of supporting documents through electronic means for: (a) registration of private sector foreign loans/borrowings without public sector guarantee; (b) registration of inward investments; and (c) sale of FX by banks covering various FX transactions; and
*Provided a grace period of one year from effectivity of the implementing (BSP) circular to file applications for registration of investments regardless of the date of funding.
The amended FX circular will have a transitory period of six months.
The BSP reminded banks that they are expected to “continuously implement safe and sound practices amidst the continuing liberalization of FX rules.”
“(The) BSP will remain vigilant and ready to act, as necessary, in pursuit of its mandate to maintain price stability, a sound financial system, and a convertible Philippine peso to support a sustained and inclusive growth,” it said.
Since 2007, the BSP has implemented 10 major FX liberalization moves to relax the rules and this resulted to the expansion of the capital markets.
The latest amendment is aimed at further deepening and developing the capital market in accordance with international practices and standards.
BSP officials have explained before that FX regulatory framework liberalization are both quantitative and qualitative measures.
Quantitative measures involve the increasing of amounts of FX to be sold by authorized agent banks (AAB) and AAB-foreign exchange corporations to residents and non-residents alike for a variety of purpose such as non-trade transactions, full or partial payments of imports and outward investments without BSP approval.
Qualitative measures, on the other hand, involve easing of policies related to the current account and capital accounts of the balance of payments.