Small banks may now play a more active role in the remittance business after being authorized by the central bank to buy and sell foreign exchange.
In a statement issued on Wednesday, the Bangko Sentral ng Pilipinas (BSP) announced that the Monetary Board has approved the amendments to the powers and scope of authority of banks to explicitly recognize the authority of thrift banks, rural banks and cooperative banks to buy and sell foreign exchange.
“These amendments serve to expressly classify thrift, rural and cooperative banks as authorized agent banks (AABs) under the Manual of Regulations for Foreign Exchange Transactions (MORFXT), thus allowing such entities to buy and sell foreign exchange as part of the banking services these financial institutions can offer its clients,” it stated.
The BSP highlighted that the classification of the subject banks as AABs necessarily binds them to strictly abide by the applicable provisions of the MORFXT, particularly on the sale of foreign exchange.
Moreover, the banks are expected to manage the risks arising from the exercise of their authority, it added.
The central bank also stressed that while it is recognized that the buying and selling of foreign exchange will entail additional market risks, ample prudential safeguards are in place.
“Monitoring of foreign exchange exposures are adequately captured in the BSP prudential reports and the extent of thrift, rural and cooperative banks’ compliance and assessment of risk management and risk exposures are evaluated during the BSP on-site examination,” it said.