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Foreign exchange transactions

The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) approved the issuance of a Manual of Regulations on Foreign Transactions, which supersedes the old regulatory framework under BSP Circular 1389 as amended. The Manual embodies the third phase of reforms in the regulation of foreign exchange (forex) transactions.

The reforms cover the liberalisation and streamlining of the rules on foreign borrowings of private banks, as well as the registration of foreign portfolio investments. To improve the balance sheets of local banks, the BSP has recognised the acquisition of non-performing assets or loans of banks and government financial institutions as eligible for financing with foreign borrowing. The acquisition of government assets for privatisation is also eligible for foreign financing.

The Manual contains provisions improving the monitoring of foreign exchange flow and confirming existing practices. For instance, it is affirmed that BSP approval is required for the prepayment of loans to be serviced through the banking system, as well as for the issuance by non-residents of bonds or similar instruments in the Philippines.

Under the Manual, only the sale of foreign exchange by banks and their forex companies is regulated. The sale of foreign exchange by non-banks (including remittance agents not affiliated to banks) is not covered by the Manual and continues to be governed by existing regulations.

Rafael A Morales

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