FRESH FOREIGN exchange (FX) liberalization measures have been issued by the Bangko Sentral ng Pilipinas (BSP), which said on Friday that it was aiming to improve the country’s investment climate.
The central bank, in a statement, said its policymaking Monetary Board on Nov. 10 approved amendments that would "keep the foreign exchange framework responsive to and attuned with current economic conditions [and]
make it easier for the general public (both residents and non-residents) to transact in foreign exchange within the banking system."
Eight measures -- the implementing rules for which will be issued shortly -- were detailed.
With regard to the aim of enhancing corporates’ access to foreign exchange, the BSP said it would:
• provide a three-month window (December 2011 to February 2012) where authorized banks and their forex units can sell FX for unregistered private sector loans, subject to scheduling and documentation requirements; and
• expand the list of non-trade current account transactions for which FX may be freely purchased without prior BSP approval to include the 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 Philippine Deposit Insurance Corp. settlement of FCDU deposit claims against shuttered banks.
To "make it easier for both residents and non-residents to transact in FX with the banking system and in the process support greater market confidence," meanwhile, the following measures were approved:
• allow authorized banks and their forex units to sell FX for advance payment of imports regardless of amount, without prior BSP approval but subject to standard documentary requirements;
• lift the requirements to inwardly remit dividends/earnings/ divestment proceeds from outward investments funded by FX purchased banks or their forex units and reinvest these funds within 30 banking days;
• lift the requirement to convert to pesos the FX funding of foreign direct equity investments to qualify for registration with the central bank;
• exempt from prior BSP approval all foreign loans for infrastructure projects included in the government’s public-private partnership (PPP) initiative, and including microfinance activities in the list of projects eligible for foreign financing;
• lift the three-day period within which FX purchased for import payments and deposited in FCDU accounts must be remitted to the offshore beneficiary; and
• lift the prior BSP approval requirement for extensions beyond one year of the validity of Letters of Credit.
"Notwithstanding the new rules, banks are expected to continue to adopt safe and sound practices in their FX transactions and dealings with clients/other counterparties," the central bank said in the statement, adding that it "will remain vigilant and stands ready to act to keep the FX market stable."
Commenting on the central bank’s move, University of the Philippines economist Benjamin E. Diokno said, "[It] is meant to increase the use of dollars because we have lots of it. It will encourage local firms to pay in dollars without so much red tape." University of the Philippines economist Benjamin E. Diokno said in a telephone interview on Friday.
Suzanne I. Felix, executive director of the Chamber of Thrift Banks, said it would help arrest the peso’s appreciation.
Jose Martin A. Velasquez, first vice-president and treasurer of Philippine Savings Bank, concurred. "I think the idea there is to stabilize the foreign exchange. You will be allowing people to pay dollar obligations so you can expect more demand for dollars."
The peso closed at P43.395 per US dollar on Friday, barely changed from P43.38 on Thursday.
make it easier for the general public (both residents and non-residents) to transact in foreign exchange within the banking system."
Eight measures -- the implementing rules for which will be issued shortly -- were detailed.
With regard to the aim of enhancing corporates’ access to foreign exchange, the BSP said it would:
• provide a three-month window (December 2011 to February 2012) where authorized banks and their forex units can sell FX for unregistered private sector loans, subject to scheduling and documentation requirements; and
• expand the list of non-trade current account transactions for which FX may be freely purchased without prior BSP approval to include the 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 Philippine Deposit Insurance Corp. settlement of FCDU deposit claims against shuttered banks.
To "make it easier for both residents and non-residents to transact in FX with the banking system and in the process support greater market confidence," meanwhile, the following measures were approved:
• allow authorized banks and their forex units to sell FX for advance payment of imports regardless of amount, without prior BSP approval but subject to standard documentary requirements;
• lift the requirements to inwardly remit dividends/earnings/ divestment proceeds from outward investments funded by FX purchased banks or their forex units and reinvest these funds within 30 banking days;
• lift the requirement to convert to pesos the FX funding of foreign direct equity investments to qualify for registration with the central bank;
• exempt from prior BSP approval all foreign loans for infrastructure projects included in the government’s public-private partnership (PPP) initiative, and including microfinance activities in the list of projects eligible for foreign financing;
• lift the three-day period within which FX purchased for import payments and deposited in FCDU accounts must be remitted to the offshore beneficiary; and
• lift the prior BSP approval requirement for extensions beyond one year of the validity of Letters of Credit.
"Notwithstanding the new rules, banks are expected to continue to adopt safe and sound practices in their FX transactions and dealings with clients/other counterparties," the central bank said in the statement, adding that it "will remain vigilant and stands ready to act to keep the FX market stable."
Commenting on the central bank’s move, University of the Philippines economist Benjamin E. Diokno said, "[It] is meant to increase the use of dollars because we have lots of it. It will encourage local firms to pay in dollars without so much red tape." University of the Philippines economist Benjamin E. Diokno said in a telephone interview on Friday.
Suzanne I. Felix, executive director of the Chamber of Thrift Banks, said it would help arrest the peso’s appreciation.
Jose Martin A. Velasquez, first vice-president and treasurer of Philippine Savings Bank, concurred. "I think the idea there is to stabilize the foreign exchange. You will be allowing people to pay dollar obligations so you can expect more demand for dollars."
The peso closed at P43.395 per US dollar on Friday, barely changed from P43.38 on Thursday.
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