BSP approves expanded FX hedging tools

The Bangko Sentral ng Pilipinas (BSP), through its policy-making Monetary Board, has approved key amendments to foreign exchange (FX) regulations that are expected to enhance Filipinos’ access to hedging tools while helping deepen the local capital market.

Outlined in BSP Circular No. 1212, the revised regulations expand the list of allowable FX hedging instruments involving the Philippine peso. Previously, only deliverable and non-deliverable FX forwards, FX swaps, and cross-currency swaps were permitted. With the updated rules, new instruments such as non-deliverable swaps, non-deliverable cross-currency swaps, and FX options are now included among the allowable tools.

Hedging refers to the strategic use of financial instruments to protect against risks posed by volatile exchange and interest rates. This update is expected to benefit a broad range of users, including overseas Filipino households, exporters, importers, and other businesses seeking more flexibility in managing currency-related risks.

The Monetary Board also approved further changes aimed at improving efficiency and adaptability within the FX regulatory framework. Among these changes is the removal of the requirement that deliverable FX forwards must match the maturity date of the underlying FX exposure. 

The revised rule now allows such contracts to have maturity dates that are equal to or shorter than the exposure, providing more flexibility when exact-matching derivatives are not available.

The BSP also issued clarifications on how banks should handle FX derivative transactions, whether for their own trading accounts or in dealings with customers. 

Additionally, an online system will be launched to streamline the application process for registering foreign investments, making it more accessible and efficient for investors.

Banks will be given a six-month transition period from the circular’s effective date to adjust their internal systems and reporting procedures in compliance with the new rules. 

The circular becomes effective 15 banking days after its publication in either the Official Gazette or a newspaper of general circulation.