With $54.7 billion assets, banks' foreign currency deposit units (FCDUs) are another source of support for the economy’s full recovery in 2022, said Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno.
FCDU assets are considered US dollar reserves, aside from the official gross international reserves (GIR) that BSP is monitoring and managing. Current GIR is at $107 billion.
“FCDUs are supporting of the country’s economic recovery,” said Diokno during his weekly press chat. FCDU assets of $54.7 billion are about 13.6 percent of the banking system’s total resources as of end-June. But this is lower by 2.8 percent year-on-year due to a slowdown in FCDU lending during the pandemic.
Bulk of FCDU assets or about 50 percent are investments in ROP securities while loans to residents represent a substantial portion of banks’ FCDU loans. As of end June, FCDU securities holdings amounted to $27.4 billion.
About 38.8 percent are loans worth $21.2 billion and another 10 percent or $5.5 billion are placements with other banks.
Diokno said the asset quality of FCDU loans continue to be manageable and profits-wise, it remains to be at comfortable levels.
FCDUs reported a net income gain of 13 percent year-on-year as of end-March of $339.4 million. The sector’s non-performing loan (NPL) ratio as of end-March was at 4.9 percent while its NPL coverage stood at 67.2 percent.
FCDU deposits which is its primary source of funding and comes from residents and private corporations, expanded by 3.2 percent year-on-year to $44.5 billion at the end of the first quarter. “This deposit structure insulates this business segment from changes in global market sentiment that could lead to funding withdrawal,” said Diokno.
“FCDUs have facilitated financial intermediation and directed lending to important sectors of the economy. The FCDU network also remains extensive and supportive of the country’s recovery,” said Diokno.
There are 76 banks with FCDU authority, of which 43 are universal and commercial banks. The rest are thrift banks and rural and cooperative banks.
Banks with FCDU authority can place FCDU funds in other banks, as well as to invest in readily marketable securities and grant short-term foreign currency loans. As for banks with expanded FCDU license, they are allowed to utilize FCDU funds for derivative or foreign exchange trades and long-term lending.
The BSP is currently revising FCDU regulations and have drafted new rules for consideration. These new rules will effectively relax and further streamline foreign currency denominated transactions.