BSP approves further forex lib measures

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) further liberalized the country’s foreign exchange regulatory framework to make it responsive and attuned to current economic conditions and at the same time to make it easier for the general public to transact foreign exchange within the banking system.

BSP Governor Amando Tetangco Jr. said the approval of further revisions to foreign exchange regulations by the central bank’s Monetary Board is in line with its thrust to facilitate trade transactions and simplify reporting requirements.

Under the amendments to the Manual of Regulations on Foreign Exchange Transactions, the ceiling for importations that would not be required to be supported by documents to be submitted to the BSP-International Operations Departments was increased 10 times from $50,000 to $500,000.

Likewise, the new guidelines also lifted the submission by banks and authorized agent banks – foreign exchange companies to BSP of hard copies of the “Consolidated Daily Foreign Portfolio Investment Registration and Outward Remittance Report.”

However, banks and authorized agent banks are still required to submit other supporting documents to the central bank.

The new amendments would encourage outflow of foreign exchange and would ease pressure on the strengthening of the peso against the dollar. The peso has so far strengthened by 1.9 percent to 43.01 to $1 last March 15 from 43.84 to $1 last December 29.

The sovereign debt crisis in Europe and the fragile economic growth in advanced economies led by the US continued to push foreign funds to emerging market economies including the Philippines.

This is the sixth phase of reforms in its foreign exchange regulatory framework implemented by the BSP.

Just last October, the BSP made several amendments to the existing foreign exchange regulations to enhance and facilitate access of corporations to foreign exchange for their legitimate transactions.

The BSP allowed unregistered private sector foreign loans to be paid using foreign exchange to be purchased from authorized agent banks and their subsidiary or affiliate foreign exchange corporations within a three-month period starting December to February.

Likewise, the list of non-trade current account transactions for which foreign exchange may be freely purchased from banks without prior BSP approval was expanded to include lease of foreign-owned equipment, refund of unused foreign grant/aid funds and foreign loan proceeds, payment of underwriting expenses/ fees/commissions including brokers’ fees payable/due to non-residents for initial public offerings involving Philippine shares, and settlement by Philippine Deposit Insurance Corp. (PDIC) of foreign currency deposit unit (FCDU) deposit claims against banks that ceased operations.

The BSP also allowed banks to sell foreign exchange for advance payment of imports regardless of amount without prior BSP approval but subject to standard document requirements.

It also lifted the requirements to inwardly remit dividends/earnings/ divestment proceeds from outward investments funded by foreign exchange purchased from banks and reinvest these funds within 30 banking days from receipt.

The changes to the rules approved last October also lifted the requirement to convert to pesos the foreign funding of foreign direct equity investments to qualify for registration with the BSP and at the same time exempt from the prior BSP approval requirement foreign/FCDU loans that would finance infrastructure projects included in the government’s list of Public-Private Partnership (PPP) projects.

Likewise, the measure also lifted the three-day period within which foreign exchange purchased for import payments and deposited in FCDU accounts must be remitted to the offshore beneficiary and also lifts the prior BSP approval requirement for extensions beyond one year of the validity of letters of credit (LCs).

In October 2010, the BSP approved the fourth phase of foreign exchange liberalization wherein it raised the limit on over-the-counter dollar purchases to $60,000 from $30,000 and relaxed the documentary requirements.

 It also allowed tourists and Filipinos residing abroad to reconvert their pesos into as much as $5,000 — from $200 — at airports and other ports of exits without needing to show proof they sold their dollars for pesos when they first arrived. It also allowed importers to purchase as much as $1 million instead of $100,000 at accredited banks to make advance payments for their purchases.

Likewise, foreign currency loans of the private sector that are registered with the central bank may be prepaid without prior BSP approval as long as there is a notice of intention to prepay submitted to the BSP at least one month before the payment date.

The liberalization also raised the amount that each investor may purchase each year for outward investments or investments in debt papers to $60 million from $30 million.

In January 2009, the BSP approved the third wave of foreign exchange reforms wherein banks were no longer required to submit to the BSP reports on their sale of foreign currencies to entities wanting to invest abroad.

In 2007, the BSP approved the first and second waves of foreign exchange liberalization measures by raising the foreign exchange limits on dollar purchases from residents and the outward investments without documentation to moderate the rise of the peso.