MANILA, Philippines – The Bangko Sentral ng Pilipinas has dialed back restrictions on foreign exchange (forex) by consumers and firms in a move seen to bring more of these transactions to the regular banking system.
The central bank released Circular No 925 entitled “Amendments to Foreign Exchange Regulations” on Tuesday, September 13, formally announcing the changes.
“With the new circular which will take effect on September 15, [individual] consumers will now be able to purchase $500,000 and corporations will be able to purchase $1 million without documents,” said HSBC Philippines President Wick Velasco, serving as Chairman of the Bankers Association of the Philippines (BAP) Open Market Committee.
Previously, the BSP capped forex transaction without supporting documents for both individuals and corporations at $120,000, Veloso told reporters at a briefing held in Makati on Wednesday, September 14.
Any individual or firm who needed forex beyond the caps would need to obtain supporting documents and BSP permission, which, he pointed out, could be a tedious process and would often lead to individuals or firms doing forex transactions in the black market.
“This is a very, very good development and the benefit to the public is significant. It allows them to be able to deal with financial institutions that are regulated instead of any unregulated entity,” he said.
He continued: “banks will also be able to give them financial advice, so it now becomes a complete [forex] solution for customers, and it also makes the financial system more secure”.
Immediate deposits and loan conversion
Aside from this, the BSP also opened up the possibility of remitting forex purchased from a bank directly to any foreign currency deposit unit (FDCU) or foreign currency bank account.
Previously, anyone who purchased forex had to wait 3 days before remitting it to any account as the BSP had to closely monitor it due to past market uncertainty, so it became a deterrent, Veloso explained.
Finally, the new regulations now allow for the conversion of loans into pesos without prior BSP approval and registration.
This is important as it makes it easier for multinational firms to loan to their Philippine subsidiaries. Before, these loans had to processed through the BSP but now these loans can be processed directly from private banks, Veloso said.
As a component of Foreign Direct Investment, inter-company borrowings has more than doubled in first half of the year.
With these moves, Veloso poined out that “the country becomes a safer place to be able to transact because it allows people to deal with financial institutions, and makes it very convenient for the public as well as for OFWs who routinely deal with forex.”
HSBC forecasts the peso to strengthen to 45 against the US dollar by the end of the year, after having successfully weathered a potentially tricky national elections and a shift to a new interest rate corridor. – Rappler.com