BSP expands FX hedging options

MONETARY authorities have approved changes to foreign exchange (FX) rules to give Filipinos more ways to hedge against volatility.

The amendments, the Bangko Sentral ng Pilipinas (BSP) said on Thursday, are also part of efforts to deepen the country' capital market.

BSP Circular 1212 expanded the list of allowable FX hedging instruments involving the peso.

Non-deliverable swaps, non-deliverable cross-currency swaps, and FX options, among others, will now be allowed in addition to the currently permitted deliverable and non-deliverable FX forwards, FX swaps and cross-currency swaps.

Other amendments approved by the BSP's policy-making Monetary Board were:

– lifting the requirement for deliverable FX forwards so that maturity dates can now be equal to or shorter than the underlying FX exposure, allowing flexibility when no matching FX derivatives are available;

– clarifying the rules applicable to banks when transacting in FX derivatives for their own account and in transacting with customers; and

– implementing an online system for the submission of applications for registration of foreign investments.

Banks were given a six-month transition period from the effectivity of the circular to make the necessary adjustments to their systems and processes.

Circular 1212 will take effect 15 banking days after its publication in the Official Gazette or in a newspaper of general circulation, the BSP said.