New forex rules eyed vs black mart lure

THE BANGKO SENTRAL ng Pilipinas (BSP) is looking to ease rules on foreign currency trading anew to encourage transactions through formal channels and away from “unregulated” platforms, the central bank chief said last week.

BSP Governor Nestor A. Espenilla, Jr. said in a speech that the regulator is drafting fresh foreign exchange regulations in a bid to make it more attractive for the public to transact through banks rather than non-bank services.

“Part of the reforms that I will be strongly advocating is the liberalization of our existing rules on foreign exchange transactions to make this a more risk- based but transparent system,” Mr. Espenilla said.

“Notwithstanding the waves of liberalization that the BSP has announced in the past, we recognize that the foreign exchange market today remains restrictive, difficult, opaque and shallow.”

The BSP chief cited a big gap between dollars traded through formal platforms that pass through the Philippine Dealing System Holdings Corp. — the country’s trading, clearing and settlement system for local capital markets — and those handled by the black market.

Mr. Espenilla said the amounts traded at the PDS — averaging about $ 600 million daily — are dwarfed by “more than $1 billion” in transactions handled by money changers, remittance agents and foreign exchange dealers.

“For transactions to be happening in the unregulated parallel markets, this has got to change,” he said.

“To preserve those kinds of rules in a market that is rapidly growing is to impede the growth of the market itself. It simply adds to cost of doing business and just creates a bigger and bigger black market.”

WAVES

The central bank has been liberalizing foreign exchange rules since 2007 in order to make the regime responsive to changing conditions.

In December, the BSP unveiled its 10th wave of easing consisting of an “express provision” for foreign banks’ capital infusion in branches operating in the Philippines.

Previous changes included a higher limit for over-the-counter dollar purchases at $500,000 for individuals and $1 million for corporates.

Dollars acquired through Philippine lenders may likewise be kept as dollar deposits with the banks and may be used to settle person-to-person transactions.

Moreover, travelers can now bring up to P50,000 cash into and out of the country, after the BSP found the old P10,000 limit obsolete.

The old cap was last set in 1995 before it was raised in September last year.

The BSP had also rolled out rules requiring local and international remittance service networks, as well as their sub-agents or partners, to register with the central bank as they operate in the Philippines. —