The Bangko Sentral ng Pilipinas (BSP) today announced that while the bulk of foreign exchange transactions so far appears to be in order, it continues to evaluate forex transactions for possible violations. To date, it has imposed administrative sanctions (monetary and non-monetary) on eight banks, two of which were required to dispose of their excess dollar holdings. A few others were given time to explain certain transactions.
The BSP decided not to publish the names of the banks that have been sanctioned, for the moment. As a practice, the disclosure of the names of erring banks is resorted to depending on the nature of the circumstance.
It will be recalled that the BSP has been closely monitoring foreign exchange transactions of all commercial and universal banks on a daily basis since February this year when it noted “an unusual demand for foreign exchange caused possibly by concerns over continuing tension in the Middle East.” BSP examiners have been reviewing day-to-day forex sales of all commercial and universal banks to ensure that they are complying with BSP regulations. In addition, banks were directed that all documents supporting the sale of foreign exchange shall be made available for verification by BSP examiners. The BSP implements daily monitoring of forex transactions whenever demand for forex goes beyond normal levels.
Parallel to this, the Monetary Board, the policy-making body of BSP, has taken steps to address the recent weakening of the peso. Last week, the MB lifted the tiering system for BSP policy rates and increased the liquidity reserve requirement for universal and commercial banks to mop up excess liquidity that was also putting the inflation target at risk.
The BSP also continues to dialogue with the Bankers Association of the Philippines to identify measures to reduce market volatility and to find ways to enforce strict compliance with forex rules.
The peso has reacted positively to these measures. After breaching P55 to $1, the peso has been gaining against the US dollar. From P54.97 last Wednesday, it improved to P54.48 Thursday, settled down at P54.45 last Friday and closed at P54.50 yesterday. Today, the peso closed at P54.30.