The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) said it approved new amendments to foreign exchange (FX) regulations to broaden Filipinos’ access to more hedging instruments and deepen the country’s capital market.
The amended regulations, contained in BSP Circular No. 1212, expand the list of allowable FX hedging instruments involving the Philippine peso.
Currently, permitted instruments are deliverable and non-deliverable FX forwards, FX swaps and cross-currency swaps. Under the revised rules, non-deliverable swaps, non-deliverable cross-currency swaps, and FX options would also be allowed.
Hedging, which refers to the use of financial instruments to mitigate risks from fluctuations in exchange rates and interest rates, benefits individuals and businesses such as overseas Filipino households, exporters and importers.
The Monetary Board said it also approved other amendments to FX rules including lifting the requirement for deliverable FX forwards to have maturity dates matching the underlying FX exposure.
Maturity dates can now be equal to or shorter than the underlying FX exposure, allowing flexibility when no matching FX derivatives are available.
Other amendments include clarifying the rules applicable to banks when transacting in FX derivatives for their own account and in transacting with customers and implementing an online system for the submission of applications for registration of foreign investments.
Banks are given a six-month transition period from the effectivity of Circular No. 1212 to make the necessary adjustments to their systems and processes and ensure compliance with the revisions in the reports and new reporting guidelines.
The circular will take effect 15 banking days after its publication either in the Official Gazette or in a newspaper of general circulation in the Philippines.