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By Maricel E. Burgonio
, Reporter
The Monetary Board has approved a
reform package in foreign-exchange regulation that could encourage
more investment inflows, Bangko Sentral ng Pilipinas (BSP) said
Thursday.
Starting April 2 this year, BSP
will set limits on overbought and oversold bank positions, allowable
outward resident investments and residents’ allowable
foreign-exchange purchases, BSP Governor Amando M. Tetangco Jr.
said.
Tetangco said the BSP would
implement 20-percent symmetrical limit on unimpaired capital with an
absolute limit of $50 million to be imposed on both the overbought
and oversold bank positions.
This would enhance banks’
capability to service increasing foreign-exchange requirements of
the corporate sector and contribute to the reduction of exchange
rate volatility, he said.
The BSP only impose a limit on
overbought positions of banks, which is at 2.5 percent.
“The increase in the overbought
limit from the current 2.5 percent of unimpaired capital to 20
percent is expected to give banks more flexibility to increase their
foreign-exchange holdings,” Tetangco said.
Restoring the oversold limit at
20 percent of unimpaired capital serves as a prudential measure to
discourage excessive exposure of banks to foreign exchange risks.
“Significant foreign-exchange
inflows increased amount of liquidity available in the system. We
don’t see immediate threat of inflation in liquidity side,”
Tetangco said, referring to the surplus position of the balance of
payments (BOP) at $3.9 billion posted last year.
Foreign-exchange transaction is
reflected on the BOP account with the FDI, portfolio investments,
exports, imports, gold, remittances of overseas Filipino workers,
government’s proceeds from loans and other accounts.
Streamlining capital account
transactions, BSP decided to increase the allowable outward
investments by residents to $12 million from $6 million without its
approval and registration.
This is expected to allow greater
portfolio and risk diversification and facilitate integration with
the global market.
Outward investments will now
include residents’ investments in foreign currency-denominated
bonds issued by the national government and other Philippine
entities.
The BSP also increased the limit
on allowable foreign-exchange purposes by residents from banks from
$5,000 to $10,000 to cover payments to foreign beneficiaries for
nontrade purposes without supporting documents.
Furthermore, the no-splitting
restriction and notarization requirement for applications to
purchase foreign exchange were also lifted by the BSP.
Tetangco said that these measures
could facilitate the rising demand by residents for foreign exchange
to service nontrade transactions such as education, medical care and
payment of service, which have risen as a result of globalization.
“The improving macroeconomic
fundamentals, as well as ongoing banking, capital market and
institutional reforms, provide a favorable setting for the
comprehensive review and gradual reform of the existing
foreign-exchange regulatory framework,” Tetangco said.
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