Forex lib to boost market confidence - BSP

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) said the decision to further liberalize the country’s foreign exchange regulatory framework would boost confidence in the country’s strong macroeconomic fundamentals despite the global economic growth concerns and the crisis in Europe.

BSP deputy governor Diwa Guinigundo said in an interview with reporters that the new foreign exchange regulatory framework approved by the central bank last week would further increase market confidence.

“This could further increase market confidence because it shows the economy is strong enough to undergo this latest foreign exchange liberalization,” Guinigundo stressed.

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 to $500,000 from $50,000.

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 as stated under the new BSP Circular No. 751.

The new amendments would encourage outflow of foreign exchange and would ease pressure on the strengthening of the peso against the dollar.

Guinigundo pointed out that the new measures would not affect trading at the foreign exchange market.

“I don’t think this will significantly affect the foreign exchange rate. Earlier reforms with much more far reaching changes did not upset orderly trading in foreign exchange,” he explained.

The BSP has so far implemented six phases of reforms in its foreign exchange regulatory framework since 2007.

For his part, BSP Governor Amando Tetangco Jr. said the further liberalization of the country’s foreign exchange regulatory framework would not disrupt the foreign exchange market.

In a text message to reporters, Tetangco said the liberalized environment is intended to streamline reportorial requirements to ease reporting burden, reduce paper requirements, and therewith over time help facilitate transactions.

“There is no expected immediate impact on the spot dollar/peso exchange rate from the relaxation of documentary requirements,” he clarified.

The series of reforms are aimed at making the country’s foreign exchange regulatory framework responsive and attuned to the current economic conditions and at the same time to make it easier for the general public to transact foreign exchange within the banking system.