BSP allows thrift banks to invest in foreign currency-denominated debt papers

The Bangko Sentral ng Pilipinas (BSP) has given thrift banks the green light to invest in foreign currency-denominated debt papers that are readily available in the market. The policy-setting Monetary Board has approved the guidelines allowing various thrift banks to engage in the business of investing in debt papers denominated in foreign currency, the BSP said in a statement Sunday. Prior to this, only the regular commercial banks and the big universal banks were allowed to invest in foreign currency-denominated debt papers. The BSP said it wants to "liberalize the rules and regulation on foreign exchange transactions" due to the heavy inflow of foreign capital into emerging markets like the Philippines. The influx of foreign capital has already boosted the country's gross international reserves to some $61 billion and pushed the balance of payments into surplus, the central bank said. Under the guidelines, the BSP noted that thrift banks may invest in foreign currency-denominated debt securities "except debt papers that were restructured during the period of moratorium in the payment of external debt" in 1980s. "Thrift banks shall invest in readily marketable foreign currency-denominated debt securities in the regular banking unit books and shall be subject to risk management guidelines," the BSP said. Readily marketable foreign currency-denominated debt securities refer to foreign currency-denominated debt securities that are quoted in an active market, with prices that are readily and regularly available from an exchange, dealer, or broker, the central bank explained. BSP Gov. Amando Tetangco Jr. has often been asked what other foreign exchange liberalization measures the central bank is planning to implement to dampen the impact of sustained foreign exchange inflows. There are speculations that a new liberalization measure may be in the offing as the BSP cannot at this point afford to make adjustments in its policy rates either way. Tetangco said the BSP has an "enhanced monetary tool kit" at its disposal that allows the authorities to respond to the challenges posed by elevated foreign inflows without resorting to adjustments in the current monetary policy settings. – JE/KBK, GMANews.TV