BSP loosens foreign exchange rules anew

Foreign exchange regulations were again loosened to allow businesses and the general public to enter into transactions without prior Bangko Sentral ng Pilipinas (BSP) approval, Bangko Sentral ng Pilipinas Gov. Amando Tetangco Jr. said on Friday. Tetangco said the relaxed rules “make it easier for residents and non-residents) to transact foreign exchange (FX) within the banking system and in the process, improve the overall investment climate in the country." The new regulations also come on the heels of a $474-million surge last October in outflows of ‘hot money’ or foreign investments in shares of stock, government securities and bank deposits, also known as portfolio investments. The relaxed regulations seem to anticipate a surge in FX transactions outside of the formal market when it allowed — in the next three months — the payment of unregistered private sector foreign loans with forex purchased from authorized agent banks and their subsidiary or affiliate foreign exchange corporations. Tetangco said the liberalized rules will “enhance and facilitate access of corporates to FX for their legitimate transactions by inducing a shift of their FX transactions from the parallel to the formal FX market." However, only loans booked and outstanding as of 30 June 2011 with payments falling due/ or o be made within December 2011 to February 2012 qualify for the just-opened FX transaction window. Tetangco added that this measure will “improve data capture of both stocks and flows of private external debt." To stem future surges For foreign loans falling due Dec. 1 - 9, the deadline for filing is Nov. 24, while for loans due from Dec. 10 to end-February the deadline is Dec. 5. In an apparent move to stem future surges in outflows of foreign portfolio investments, the Monetary Board lifted its requirements on inward remittance of dividends, earnings and divestment proceeds from outward investments funded by foreign exchange purchased and the reinvestment of these funds within 30 banking days. The relaxed regulations also allow authorized banks and moneychangers “to sell FX for advance payment of imports regardless of amount, without prior BSP approval but subject to standard document requirements." Also exempted from prior BSP approval are foreign loans that will finance infrastructure projects that are included in government’s list of public-private partnership projects. The BSP also included microfinance activities in the list of projects eligible for foreign financing. "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," Tetangco said. — ELR/VS, GMA News