Rules issued for hedging facility
MONETARY authorities have issued enhanced guidelines for a hedging facility aimed at preventing currency speculation among businesses and easing demand pressure on the peso- dollar exchange rate.
The Currency Rate Risk Protection Program (CRPP), which the Bangko Sentral ng Pilipinas ( BSP) reactivated earlier this month as the peso hit new lows against the greenback, will be offered through universal/ commercial banks for clients seeking to hedge future foreign exchange exposures.
It involves a non- deliverable US dollar/ Philippine peso forward ( NDF) contract between the central bank and a universal/ commercial bank.
“In an NDF contract, only the net difference between the contracted forward rate and the spot rate shall be settled in pesos upon maturity of the contract,” the BSP said.
Eligible under the CRPP facility are unhedged foreign currency obligations of not less than $ 50,000.00 that are current and outstanding as of the date of application.
These include Bangko Sentral- reported/ registered short- term ( ST) trade- related loans from eligible banks, medium/ long- term trade- related Foreign Currency Deposit Unit/ Regular Banking Unit loans with payments maturing within 90 days as of date of application, ST trade- related borrowings of oil companies from offshore banking units and US dollar trust receipts, among others.
“The maximum tenor of the CRPP contract is 90 days with option to reavail,” the Bangko Sentral said.
Exposures under the CRPP facility will not be subject to NDF position limits. Also, reduced market risk capital charges will be applied for net open positions for NDFs under the facility.
Lastly, the BSP said that universal banks/ commercial banks will not need additional approvals since transactions under the CRPP are considered as generally authorized derivatives activities.
“The terms, conditions and the reporting requirements of the CRPP Facility will be covered by a separate issuance on the implementing guidelines of the CRPP Facility,” it said.
The last time the CRPP was implemented was in 2009.
MAYVELIN U. CARABALLO