MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) has approved the fifth phase of reforms in its foreign exchange regulatory framework to make it responsive and attuned with current economic conditions and make its easier for the general public to transact foreign exchange within the banking system.
BSP Governor Amando M. Tetangco Jr. said in a statement that the central bank’s Monetary Board made several amendments to the existing foreign exchange regulations.
“The approved amendments to existing foreign exchange regulations is part of the bank’s continuing efforts to keep foreign exchange regulatory framework responsive and attuned with current economic conditions; make it easier for the general public (both residents nd non-residents) to transact foreign exchange within the banking system and in the process, improve the overall investment climate in the country,” Tetangco stressed.
He pointed out that the new measure aims to enhance and facilitate access of corporates to foreign exchange for their legitimate transactions by inducing a shift of their foreign exchange transactions from the parallel to the formal foreign exchnage market.
“This move will also improve data capture of both stocks and flows of private external debt,” he added.
To achieve this, Tetangco said the BSP would allow unregistered private sector foreign loans to be paid using foreign exchange to be purchased from authorized agent banks (AABs) and their subsidiary or affiliate foreign exchange corporations (AAB-forex corps) within a three-month period starting December to February.
To qualify for this temporary window, the loans should be booked and outstanding as of June 30 with payments falling due or to be made within December to February next year. Borrowers should submit to the BSP an application not later than Nov. 24 or loans due Dec. 1-9 and on Dec. 5 for loans due Dec. 10 and onwards.
Tetangco has expanded the list of non-trade current account transactions for which foreign exchange may be freely purchased from AABs or AAB-forex corps without prior BSP approval to include lease of foreign-owned equipment, refund of unused foreign grant/aid funds and foreign loan proceeds, payment of underwriting expenses/ fees/commissions including brokers’ fees payable/due to non-residents for initial public offerings involving Philippine shares, and settlement by Philippine Deposit Insurance Corp. (PDIC) of foreign currency deposit unit (FCDU) deposit claims against banks that ceased operations.
The BSP chief added that the new measure would also make it easier for both residents and non-residents to transact in foreign exchange with the banking system and in the process support greater market confidence.
“This objective is expected to further liberalize, simplify and clarify existing foreign exchange rules and procedures,” Tetangco stressed.
According to him, the new rules would allow AABs and AAB-forex corps to sell foreign exchange for advance payment of imports regardless of amount without prior BSP approval but subject to standard document requirements.
It would also lift the requirements to inwardly remit dividends/earnings/ divestment proceeds from outward investments funded by foreign exchange purchased from AABs or AAB-forex corps and reinvest these funds within 30 banking days from receipt.
Tetangco said the new measure also lifts the requirement to convert to pesos the foreign funding of foreign direct equity investments to qualify for registration with the BSP and at the same time exempt from the prior BSP approval requirement foreign/FCDU loans that would finance infrastructure projects included in the government’s list of Public-Private Partnership (PPP) projects.
However, he explained that these loans would have to be subsequently registered with the BSP to qualify for servicing using foreign exchange to be purchased from AABs/AAB-forex corps.
Furthermore, the BSP also agreed to include microfinance activities in the list of projects eligible for foreign financing under Section 25 of the Manual of Regulations on Foreign Exchange Transactions.
Likewise, the measure also lifts the three-day period within which foreign exchange purchased for import payments and deposited in FCDU accounts must be remitted to the offshore beneficiary and also lifts the prior BSP approval requirement for extensions beyond one year of the validity of letters of credit (LCs).
However, he clarified that LCs with payment terms of more than one year reckoned from initial shipment date are covered by the foreign exchange manual that governs foreign loans.
Tetangco said the BSP would remain vigilant and stands ready to act to keep the foreign exchange market stable.
“Notwithstanding the new rules, banks are expected to continue to adopt safe and sound practices in their foreign exchange transactions and dealings with clients or other counterparties,” the BSP chief said.
In October last year, the BSP’s Monetary Board approved the fourth phase of foreign exchange liberalization wherein it raised the limit on dollar purchases and relaxed the documentary requirements. The central bank raised the limit on over-the-counter foreign exchange purchases by Filipino residents from accredited banks to $60,000 from $30,000.
It also allowed tourists and Filipinos residing abroad to reconvert their pesos into as much as $5,000 — from $200 — at airports and other ports of exits without needing to show proof they sold their dollars for pesos when they first arrived. It also allowed importers to purchase as much as $1 million instead of $100,000 at accredited banks to make advance payments for their purchases.
Likewise, foreign currency loans of the private sector that are registered with the central bank may be prepaid without prior BSP approval as long as there is a notice of intention to prepay submitted to the BSP at least one month before the target payment date and a BSP registration letter is presented to the selling bank.
The liberalization also raised the amount that each investor may purchase each year for outward investments or investments in debt papers to $60 million from $30 million.
In January 2009, the BSP approved the third wave of foreign exchange reforms wherein banks were no longer required to submit to the BSP reports on their sale of foreign currencies to entities wanting to invest abroad.
In 2007, the BSP approved the first and second waves of foreign ecxhange liberalization measures by raising the foreign exchange limits on dollar purchases from residents and the outward investments without documentation to moderate the rise of the peso. - By Lawrence Agcaoili
