Banks ask BSP to further liberalize forex rules

MANILA, Philippines—The banking industry wants the Bangko Sentral ng Pilipinas to liberalize foreign exchange rules some more to further ease the conduct of banking business involving currencies.

Aurelio Montinolla III, president of the Bankers Association of the Philippines (BAP), said that while foreign exchange rules have been relaxed by the BSP over the years, bankers still saw room for further easing.

“Further easing could be done, such as in terms of the amount of dollars people can buy [without having to submit documentary requirements to the BSP],” Montinola said.

Montinola, who is also president of Bank of the Philippine Islands, said further relaxation of rules could help avoid market distortions.

The banking industry believes easing restrictions would help banks better service the foreign exchange needs of their clients, and thus aid in more economic activities.

In October 2010, the BSP implemented the third wave of reforms intended to liberalize the country’s foreign exchange environment. Central bank officials said easing of rules on foreign exchange would help prevent the steep fall or rise of the peso.

One of the reforms was the raising of the ceiling of the amount of dollars people could buy from banks without the need to submit documentary requirements from the BSP. The ceiling was raised from $30,000 to $60,000.

Another reform was the raising of the ceiling, from $100,000 to $1 million, on the amount of dollars importers could buy from banks without the need to seek approval of the BSP.

The third wave of liberalization of foreign exchange rules, implemented in late 2010, addressed significant appreciation pressures on the peso.

The relaxed rules made it easier for individuals and corporate entities to buy dollars, thus raising demand for the currency. Consequently, the upward pressures on the peso eased.

The BSP has been saying it does not have a bias in favor of a strong or weak peso, but has said too much volatility should be avoided as this would be disruptive to business.

Officials said the easing of foreign exchange rules could also be done to help temper depreciation pressures on the local currency.

They said the BSP might indeed implement another wave of foreign exchange rules liberalization, but there have been no details on this.