BSP Officer-In-Charge Nestor A. Espenilla, Jr. announced today that the Monetary Board of the Bangko Sentral ng Pilipinas has further liberalized existing foreign exchange (FX) regulations. This latest move is the sixth in a series of reforms initiated by the Bank since 2007 to keep FX policies responsive to current economic conditions.
The new rules aim to further simplify FX transactions of the general public with banks. For instance, residents can now buy a higher amount of FX to meet the rising costs of education and medical bills incurred offshore, foreign travel, and other services, without need for documentation. Philippine residents will also have more investment instruments to choose from that can be funded with FX bought from banks.
Non-residents, on the other hand, have been given more options for funding their onshore peso requirements. Moreover, reconversion to FX of non-residents’ onshore peso funds may now be done without prior BSP approval for certain instances.
The new measures are also expected to further encourage the general public to shift their transactions from the informal market to the banking system, which may further improve capture of pertinent information needed for policy making.
The new rules consist of the following:
1) Increase in the amount of FX that may be sold over-the-counter (OTC) by authorized banks and foreign exchange corporations to residents without documentation for services transactions (from US$60,000 to US$120,000 or its equivalent in other foreign currency);
2) Increase in the amount of FX that may be purchased using unspent pesos of departing non-resident tourists or balikbayan without need to show proof/s of previous sale of FX for pesos (from US$5,000 to US$10,000 or its equivalent in other foreign currency calculated at prevailing exchange rates);
a) the following as funding for onshore peso accounts of non-residents:
i. onshore peso receipts of non-residents from residents for services rendered by the former to the latter;
ii. peso receipts of onshore expatriates with contracts of less than one (1) year representing salary/allowance/other benefits; and
iii. onshore peso funds of foreign students enrolled in the Philippines and non-resident Filipinos.
b) the depository bank to sell FX for the balance of the peso deposit account funded in the forms enumerated above up to US$60,000 per day.
4) Inclusion of the following as allowable forms of investment for Philippine residents that may be funded with FX to be purchased from authorized banks and their foreign exchange corporations:
a) Offshore FX-denominated global funds/mutual funds and unit investment trust funds;
b) FX intercompany loans of resident enterprises to their offshore parent companies/subsidiaries with an original tenor of at least one (1) year;
c) Real property abroad, including condominium units;
d) Debt securities issued offshore by both residents and non-residents that are in local banks’ asset inventory; and
e) Equity securities issued by residents that are listed abroad.
5) Allowing of banks (which registered foreign investments funded with peso proceeds of FX inward remittance/s) to sell the equivalent FX of the excess peso proceeds of the FX funding, as well as any interest earned thereon, at the exchange rate prevailing on the date of FX sale, provided that at least 50 percent of the amount inwardly remitted was actually invested in the country and duly registered at the time of the application for reconversion of the excess pesos to FX;
6) Extension by two (2) years (or up to 28 December 2016) of the window during which loans of resident private sector borrowers from FCDUs/offshore sources that are not guaranteed by public sector entities/AABs and intended to finance the Government’s Public-Private Partnership (PPP) projects may be obtained without prior BSP approval. (However, such loans shall continue to be subject to BSP registration to qualify for servicing using FX resources of AABs/AAB forex corps.);
7) Change of the deadline within which applications for registration of foreign direct investments shall be filed with the BSP from five (5) years to one (1) year from the date of inward remittance/actual transfer of assets to the Philippines, subject to a two (2)-year transition/grace period. This is an administrative mechanism that intends to improve capture of more current data on foreign investments and facilitate submission to BSP of supporting documents for registration of the investments.
In addition to these measures, certain updates/amendments to the Manual of Regulations on Foreign Exchange Transactions have likewise been approved to provide greater clarity to the Manual.
The Officer-In-Charge also announced that payments for unregistered private sector foreign loans may be funded with FX to be purchased from authorized agent banks and their foreign exchange corporations on a temporary basis and for a limited period of time under certain conditions.
To qualify for this temporary window, the loans should be booked and outstanding as of 30 September 2012 in the borrower’s records, with payments falling due/to be made from May to December 2013. Documentation requirements, including a written application, shall apply.
The implementing circulars for the above measures will be issued shortly. The Officer-In-Charge emphasized, however, that notwithstanding the new/revised rules, banks are expected to continue to adopt safe and sound practices in the conduct of transactions and dealings with clients/other counterparties.
The Officer-In-Charge assured that the BSP shall likewise remain vigilant and stand ready to act to keep the FX market stable.