MANILA, Philippines – The country’s foreign exchange rules were liberalized anew on what the Bangko Sentral ng Pilipinas (BSP) said was part of efforts to prepare the Philippines for the financial integration of Southeast Asian economies by 2015.
“The objective is to further broaden the scope for regional and international transactions as we become more integrated with financial markets globally,” BSP Governor Amando Tetangco Jr. said in a text message to reporters.
BSP Deputy Governor Diwa Guinigundo, in a separate text message, said the new rules were meant to “prepare the Philippines for a more integrated financial markets” of the Association of Southeast Asian Nations (ASEAN) by 2020.
Tetangco said the central bank is allowing non-residents to invest in foreign companies listed in the Philippine Stock Exchange. Peso earnings from these investments may now also be converted into dollars.
Prior to this, Guinigundo said only Philippine residents could register with custodian banks in order to buy shares of PSE-listed non-resident companies.
Registration of portfolio investments – inflows to equities, bonds and peso deposits – through custodian banks are necessary to allow remittance of earnings and convert them into other currencies.
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“We are setting the stage for the eventuality that trading links (among the ASEAN nations) are established,” he told reporters.
“This is in connection also to the planned cross-listing” on regional bourses planned under the ASEAN financial integration, Guinigundo explained.
In addition, the BSP is also allowing the pre-payment of central bank-registered short-term loans with maturities of less than one year. Guinigundo said originally, prepayment was not allowed.
“This will facilitate access to the banking system for legitimate transactions requiring payment in foreign exchange,” Tetangco said.
Bank documentary requirements were also relaxed, he said, this time by waiving the need for lenders to support reports on importations under documents against acceptance and open account arrangements.
“The measure will simplify and reduce reporting burden on banks,” Tetangco pointed out.
The BSP has embarked on six waves of foreign exchange liberalization since 2007 targeted at providing conducive business environment and until recently, tempering capital inflows flooding emerging markets such as the Philippines.
The new rules will take effect upon the publication of a pertinent circular.