In response to the current global and local economic and financial conditions, the Bangko Sentral ng Pilipinas (BSP) is amending its foreign exchange (FX) regulation to further streamline the reporting and documentary requirements for FX and trade transactions and the registration of foreign loans and investments by both public and private borrowers.
The proposed changes to FX regulation will be the BSP’s 12th round of reforms done on its FX policies since 2007.
The latest version, which will be circulated among banks and FX players for comments and suggestions, involve FX transactions that support business activities as the country battles its way out of the economic slump brought on by the global COVID-19 pandemic.
The proposed amendments to FX regulations will be consolidated into one “FX Manual” and puts emphasis on compliance of all FX transactions with applicable laws, rules and regulations, including the “Know Your Customer” policy, and to exercise due diligence.
Changes were made to the sale of FX, electronic submission of documents, and reporting of FX transactions.
The draft circular also included revisions to current account transactions, the peso deposit accounts of non-residents and cross-border transfer of local foreign currencies, as well as foreign merchandise trade transactions.
Rules on foreign merchandise trade transactions were consolidated under the proposed FX Manual. “As a general rule, all kinds of merchandise imports/exports are allowed. However, the importation/exportation of certain commodities is regulated or prohibited for reasons of public health and safety, national security/interest, international commitments, development/rationalization of local industry and by provision of law,” said the BSP.
The amendments on financial account transactions covered loans, borrowings and guarantees. The rules on foreign loans and borrowings including bonds, notes, other debt instruments, and foreign currency loans from local banks – for both public and private sector – with guarantees will require prior BSP approval unless otherwise indicated in the FX Manual. The schedule on the submission of foreign funding plans will also include medium and long-term that will be submitted by end-September of each year for borrowings for the fourth quarter of the current year and the succeeding one as well.
Last year, the BSP launched 12 FX public awareness briefings as an information campaign. These were attended by bankers, businessmen, exporters, foreign affairs and other government personnel. The talks centered on two BSP circulars on FX liberalization such as BSP Circular 984 (“Amendments to the Manual of Regulations on Foreign Exchange Transactions, as amended” approved December 2017) and Circular 1030 (“Amendments to Foreign Exchange Regulations” approved February 2019).
Also in 2019, the BSP launched an FX sub-section in its website to provide the public with information on FX rules, guidelines, procedures, processes and other related concerns.
The BSP said the continuous FX reforms allow the BSP to do the following: adopt necessary measures to address any perceived emerging concern/problem; and maintain its ability to capture timely, reliable and comprehensive data for its various needs, such as policy review and formulation, analysis of trends and developments (volatility in capital flows), statistics and report generation.
The central bank’s FX policy reviews are regularly undertaken in a “well-calibrated manner” and “giving due consideration to prevailing domestic and international economic and financial conditions, while ensuring that timely prudential mechanisms (documentary/reportorial requirements) and safeguard measures remain in place.”
The Philippines has been under COVID-19 lockdown since mid-March. The most severe phase of the community quarantine period was March to May. By June and until today, most of the country’s major economic areas are still in lockdown but less restricted to allow the reopening of business activity.