The Bangko Sentral ng Pilipinas will further liberalize foreign exchange rules by easing registration requirements for foreign direct investments, Governor Nestor A. Espenilla Jr. said.
“Right now, the BSP is working on a new regulation in consultation with the banking industry. Basically, we want to do away with the registration process as a necessity to be able to access foreign exchange from the financial system,” Espenilla said during a luncheon meeting hosted by the European Chamber of Commerce of the Philippines.
"That registration was actually a product of the crisis in the ’70s’ and this is what we are saying: It was borne out of a situation where we were rationing foreign exchange simply because we didn’t have a lot of those back in the day,” the BSP chief said.
"Today, we have a very different economy—there’s a lot of foreign exchange available,” he said.
According to Espenilla, what they wanted now was for transactions to be reported to the BSP, but not as a screening mechanism of what should come in or out.
“We are reforming the system such that electronic reporting can be done so you don’t have to submit documents to the BSP. We’re going to do that not just for inward investments but also for foreign borrowings by the private sector,” Espenilla said.
“The reason for that is today we have a highly regulated formal foreign exchange market and a very liberal parallel market that passes through the FCDU [foreign currency deposit units] system. What it has created is a formal foreign exchange market that is shrinking as opposed to a growing parallel market. We want to see transactions move into the regulated market where it is visible, and where we can apply clear standards, including antimoney laundering standards,” he added.
The approach, he said, would be dual. Requirements will be tightened for nonbanks that are currently dominant in the parallel market while those on banks operating in the formal market will be liberalized, he said.
Ben O. de Vera | Reporter