The amount and the specific terms have not been determined yet, but the BSP said the transaction would generate more foreign currency to beef up the country’s foreign exchange reserves.
BSP Deputy Governor Amando Tetangco said the proposed currency swap has been approved in principle but the parties still have to sit down and determine the details of the transaction.
According to Tetangco, the swap would follow the general parameters of previous currency swap arrangements.
IFC is the investment arm of the World Bank mainly in the private sector and has been actively participating in various financial transactions worldwide.
The IFC had earlier expressed interest in a possible currency swap agreement and is also involved in negotiations with several domestic banks to explore the possible acquisition of their bad loans and assets under the Special Purpose Vehicle Act (SPVA).
In an earlier interview, IFC country manager for the Philippines Vipul Bhagat told reporters that they are in talks with several banks with non-performing loans and assets to sell, but he said negotiations are still in the early stages.
"None of them are advanced enough for me to identify but we are talking with several and we are optimistic," Bhagat said. "We think it is necessary to demonstrate that this scheme is workable and even profitable."
However, Bhagat said that the on-going negotiations involved significant transactions that would cover the sale of a significant portfolio of NPAs and NPLs.
"It doesn’t make sense to do it small so these transactions are, I would say, significant in terms of portfolio size," he said. "These are big ones."
Bhagat said the amount involved could not be disclosed but he said that as a rule of thumb, IFC’s participation in investment ventures usually amounts to up to 20 percent equity and 50 percent of the debt financing.
"Suffice it to say that we are committed to making this sale to get the SPVA program going," he said. "The only difference is that when IFC participates, we have to make sure that there are some mechanisms for social protection in the deal."
Philippine officials have been trying to persuade the cash-rich organization to help jumpstart the unloading of bad loans in the financial system under the SPVA.
IFC reported earlier that they have so far invested a total of $120 million in the Philippines, its third largest investment in East Asia.
IFC’s largest exposure is in China at $300 million, followed by Indonesia, amounting to $150 million.