BSP Governor Amando M. Tetangco, Jr. announced today that the Monetary Board of the Bangko Sentral ng Pilipinas (BSP), at its meeting on 10 November 2011, approved several amendments to existing foreign exchange (FX) regulations as part of the Bank’s continuing efforts to keep the FX regulatory framework responsive to and attuned with current economic conditions; make it easier for the general public (both residents and non-residents) to transact in FX within the banking system and in the process, improve the overall investment climate in the country.
The new measures aim to achieve the following:
A. Enhance and facilitate access of corporates to FX for their legitimate transactions by inducing a shift of their FX transactions from the parallel to the formal FX market. This move will also improve data capture of both stocks and flows of private external debt. This objective is expected to be attained by the following:
1) Allow within a three (3) month period (December 2011 to February 2012), unregistered private sector foreign loans to be paid using FX to be purchased from authorized agent banks (AABs) and/or their subsidiary/affiliate foreign exchange corporations (AAB-forex corps).
To qualify for this temporary window, the loans should be booked and outstanding as of 30 June 2011 with payments falling due/to be made within December 2011 to February 2012. For this purpose, the borrowers shall submit to the BSP, through the International Operations Department, an application using the prescribed form with supporting documents/information, as may be required, not later than:
Deadline for Filing Payment Due Date and/or Date of Payment
24 November 2011 1-9 December 2011
5 December 2011 10 December 2011 – onwards
A BSP letter-authority shall be issued for presentation to the FX selling institution.
2) Expand the list of non-trade current account transactions for which FX may be freely purchased from AABs or AAB-forex corps without prior BSP approval to include the following: (a) Lease of foreign-owned equipment; (b) Refund of unused foreign grant/aid funds and foreign loan proceeds; (c) Payment of underwriting expenses/ fees/commissions including brokers’ fees payable/due to non-residents for initial public offerings (IPOs) involving Philippine shares; and (d) Settlement by Philippine Deposit Insurance Corporation of FCDU deposit claims against banks that ceased operations.
B. Make it easier for both residents and non-residents to transact in FX with the banking system and in the process support greater market confidence. This objective is expected to further liberalize, simplify and clarify existing FX rules and procedures with the following measures:
3) Allow AABs and AAB-forex corps to sell FX for advance payment of imports regardless of amount, without prior BSP approval but subject to standard document requirements.
4) Lift the requirements to: (i) inwardly remit dividends/earnings/ divestment proceeds from outward investments funded by foreign exchange purchased from AABs or AAB-forex corps; and (ii) reinvest these funds within 30 banking days from receipt.
5) Lift the requirement to convert to pesos the FX funding of foreign direct equity investments to qualify for registration with the BSP .
6) Exempt from the prior BSP approval requirement foreign/FCDU loans that will finance infrastructure projects that are included in the Government’s list of Public Private Partnership (PPP) projects (provided these are subsequently registered with BSP to qualify for servicing using FX to be purchased from AABs/AAB-forex corps), and include Microfinance activities in the list of projects eligible for foreign financing under Section 25 of the Manual of Regulations on Foreign Exchange Transactions (FX Manual).
7) Lift the 3-day period within which FX purchased for import payments and deposited in FCDU accounts must be remitted to the offshore beneficiary.
8) Lift the prior BSP approval requirement for extensions beyond one (1) year of the validity of Letters of Credit (LCs).
In this connection, the Governor clarified that LCs with payment terms of more than one (1) year reckoned from initial shipment date are covered by Part II Chapter I of the FX Manual which govern foreign loans (e.g., deferred LCs, open account arrangements, etc. as defined under Sec. 24 of the FX Manual).
Implementing circulars for these policies will be issued shortly. Notwithstanding the new rules, banks are expected to continue to adopt safe and sound practices in their FX transactions and dealings with clients/other counterparties. The BSP will remain vigilant and stands ready to act to keep the FX market stable.