PHILIPPINES NEWS SERVICE — The Monetary Board has approved changes in foreign exchange regulations, allowing banks and individuals to purchase more dollars in response to the expanding needs of the economy.
Bangko Sentral ng Pilipinas Gov. Amando Tetangco Jr. said “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.”
The changes, covering both capital and current account transactions, include a higher amount of foreign exchange that residents can buy from banks without supporting documents to $10,000 from $5,000.
The Bangko Sentral also increased the maximum offshore investments of residents without central bank approval and registration to $12 million a year from $6 million and raised the overbought limit of banks to 20 percent of unimpaired capital from 2.5 percent, with an absolute limit of $50 million.
It re-introduced the oversold limit at 20 percent, with an absolute limit of $50 million.
The new regulations will take effect on April 2.
The central bank is also waiving the notarization requirement for buyers of foreign exchange.
Tetangco said “these measures will facilitate the rising demand by residents for foreign exchange to service non-trade transactions such as education, medical care and payment of service fees that have risen as a result of globalization.”
The relaxation of the documentary requirement and the corresponding increase in the allowed purchases are expected to lower transaction costs for bank clients.
Tetangco said transactions were still covered by existing anti-money laundering regulations.
The central bank said it would allow banks to sell foreign exchange to residents who planned to invest in foreign currency denominated bonds issued by the national government and other Philippine companies.
“The increase in the allowable limit on outward investments is expected to allow greater portfolio and risk diversification and facilitate integration with global markets,” Tetangco said.
The central bank tightened the overbought limit, or the amount that banks can buy for themselves, in 2001 when the peso weakened sharply. The re-imposition of the oversold limit, meanwhile, is expected to slow the appreciation of the peso.
Tetangco said raising the overbought limit to 20 percent of unimpaired capital or an absolute limit of $50 million would give banks more flexibility to increase their foreign exchange holdings and enhance their capability to service clients.
“Restoring the oversold limit at 20 percent of unimpaired capital, on the other hand, serves as a prudential measure to discourage excessive overexposure of banks to foreign exchange risks,” Tetangco said.
The central bank said the liberalization of the foreign exchange regulatory framework is part of efforts to improve the economic and financial regulatory environment.
The measures are expected to boost confidence in the country and result in more foreign exchange flows, including foreign direct investments.