Banks may use yen for peso liquidity

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BSP-BOJ cross-border liquidity pact now in force

Banks in the Philippines can now tap the yen/peso swap facility of the Bank of Japan and the Bangko Sentral ng Pilipinas (BSP) as the rules governing the agreement between the two monetary authorities took effect Friday.
The facility, or the cross-border liquidity arrangement (CBLA), allows banks in the Philippines, including Japanese banks, to draw Philippine peso liquidity against their Japanese yen holdings during emergency situations.

According to the Resolution 1281 of the Monetary Board, a bank can use the Japanese yen/Philippine Swap Facility provided it has established the presence of an emergency situation, it has yen holdings that can be delivered and deposited to the BSP’s account at the Bank of Japan; it has CAMELS/ROCA composite rating of at least “3” and a Management/Risk Management component rating of at least “3” in the latest Report of Examination; it has no unsafe or unsound banking practice cited in the latest Report of Examination; and it has complied with the minimum capital requirement and risk-based capital ratio as provided under the applicable
and existing capital adequacy framework.

“For purposes of this facility, an emergency situation is when a bank is under a state of severe shortage of PHP liquidity or under serious financial pressures brought about by unforeseen events or events which though foreseeable, cannot be prevented by the bank concerned,” it stated.


The Monetary Board said that a bank shall submit an application to the appropriate department of the supervision and examination sector, and a copy furnished with the Treasury Department, a certification under oath that the applicant bank meets the eligibility requirements a declaration that there is an emergency situation in the bank, and a duly notarized secretary’s certificate together with a resolution of the board of directors of the bank.

BOJ and the BSP agreed in February last year to establish the CBLA to enhance financial stability in the Philippines.

“This collaboration reinforces BOJ and BSP’s continued commitment to support the long-standing economic and financial relationship between Japan and the Philippines,” a BSP statement on Friday said.

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