ADB launches 1st local currency swap for RP

The Asian Development Bank (ADB) approved yesterday a $200-million cross-currency financing facility for the Philippines in the first arrangement of its kind in the region.

Under the facility, the ADB will swap foreign convertible currencies with the Philippine government for pesos which are then lent to banks that can re-lend them to selected business sectors.

The foreign currencies involved are the dollar, euro and the yen.

"This is a highly innovative pilot project that aims to promote private sector and capital markets development in the Philippines," said Ajay Sagar, a senior ADB finance specialist.

"It not only marks the first time that ADB is providing long-term local currency financing in the Philippines. It is also ADB’s first local currency swap with a government," he told a news conference.

International banks with a long-term credit rating of BBB or better can borrow up to $75- million equivalent each under the facility, while local the banks’ maximum borrowing limit will be set at $10 million each.

They may re-lend to businesses in sectors involved in, among other areas, infrastructure development, manufacturing, small and medium enterprises, housing and retailing.

The multilateral agency will also allow loans for restructuring infrastructure projects.

A total of 17 local and international banks have been accredited for participation in the 15-year facility.

The international banks are ANZ Banking Group Ltd., Bank of America N.A., Bank of Tokyo-Mitsubishi Ltd., Citibank N.A., Deutsche Bank, Hong Kong and Shanghai Banking Corp. (HSBC), Internationale Nederlanden Groep (ING Bank) Bk., International Commercial Bank of China (ICBC), JP Morgan Chase Bank, Mizuho Corporate Bank Ltd. and Standard Chartered Bank.

Also eligible to participate are subsidiaries of international banks, namely ABN Amro Bank, Chinatrust Commercial Bank, Maybank Philippines Inc. and United Overseas Bank Philippines (UOBP).

In addition, the Bank of the Philippine Islands (BPI) and Metropolitan Bank & Trust Co. may borrow up to $10-million equivalent each from the facility. This limit will not apply if the loan is guaranteed by one of the participating international banks.