RULES expanding the scope of operations of small banks in the country were released yesterday by the Bangko Sentral ng Pilipinas (BSP) as part of its mandate of providing greater financial inclusion.
Under BSP Circular 864 that was signed by BSP Governor Amando M. Tetangco, Jr. last Dec. 22, thrift banks qualified to issue foreign letters of credit and engage in import and export transactions may apply to “operate as a dealer of deliverable FX (foreign exchange) forwards in order to service the trade-related hedging requirements of its clients.”
However, the BSP required that the tenor of the FX forwards dealt should match the term of the underlying trade transaction and that thrift banks interested in acting as dealers of FX forwards be covered by all regulations prescribing capital for market risk.
The applicant thrift bank should also comply with sales and marketing guidelines prescribed by the BSP, according to the circular.
Meanwhile, under BSP Circular 865, thrift, rural, and cooperative banks can now buy and sell foreign currencies to enable them to play a more active role in the remittance business.
The BSP, in a statement last November when it announced that its policy-setting Monetary Board had approved the two circulars, said that small banks are expected to manage any risks arising from the buying and selling of foreign currencies.
The central bank noted, however, that ample safety nets are in place that will “adequately capture... the extent of thrift, rural, and cooperative banks’ compliance and assessment of risk management…”
BSP Circulars 864 and 865 -- which amended parts of the Manual of Regulations for Banks -- will take effect 15 calendar days after their publication either in the Official Gazette or in a newspaper of general circulation.
Chamber of Thrift Banks President and BPI Family Savings Bank President Jose Teodoro K. Limcaoco earlier said that allowing thrift banks to deal in deliverable FX forwards would provide their clients the ability to hedge their foreign exchange exposures.
“More and more the SME (small and medium enterprise) sector is getting involved with international customers or suppliers. The ability to manage FX exposure will make our clients more competitive,” he said last November.
Meanwhile, BSP Deputy Governor Nestor A. Espenilla, Jr. had said that the two new regulations will “make the economy more competitive and inclusive”, especially in an increasingly integrated Southeast Asian economy. -- Daryll Edisonn D. Saclag
source: Businessworld
