Manila: The Bangko Sentral ng Pilipinas (BSP) announced fresh amendments to its foreign exchange (FX) regulations that will give Filipinos more access to hedging instruments and help deepen the domestic capital market.

According to Philippines News Agency, the BSP's policy-making Monetary Board (MB) has increased the number of hedging options available to the public. These now include non-deliverable swaps, non-deliverable cross-currency swaps, and foreign exchange options. FX swaps are defined by the BSP as agreements involving the exchange of two currencies using the prevailing spot rate and swapping these at a specified time using a different exchange rate.

Prior to the latest MB decision, hedging options for Filipinos were limited to deliverable and non-deliverable foreign exchange forwards, which are agreements for the delayed delivery of a specific amount of foreign currency at a specified exchange rate. Hedging serves as a tool to address risks from exchange rate and interest rate movements, benefiting individuals and businesses such as overseas Filipino households, exporters, and importers.

The MB has not only broadened hedging options for Filipinos but also lifted the requirement for deliverable FX forwards to have maturity dates matching the underlying FX exposure. The central bank stated that maturity dates can now be equal to or shorter than the underlying FX exposure, allowing for flexibility when no matching FX derivatives are available.

Additionally, the board has amended the rules applicable to banks when transacting in FX derivatives for their own account and in transacting with customers. The BSP also permitted the online submission of applications for the registration of foreign investments.

Banks have been given a six-month transition period from the effectivity of Circular No. 1212 to adjust their systems and processes and ensure compliance with the revisions in the reports and new reporting guidelines.