BSP eases documentation rules on foreign borrowings

The Bangko Sentral ng Pilipinas (BSP) yesterday said it has lifted the prohibition on the notarization of documents on private sector foreign loans that are without guarantees.

BSP Governor Amando M. Tetangco Jr. said the easing of documentation rules not only covers foreign loans but also deferred payment and other foreign or foreign currency denominated obligations of the private sector. These documents were previously prohibited from being notarized.

“The move is part of continuing efforts to have an appropriate regulatory framework for foreign exchange (FX) transactions,” said Tetangco in a statement.

He further stated that the continuing review and fine tuning of BSP regulations is consistent with its commitment to maintain a “safe and sound financial system, a stable FX market, and an appropriate monetary policy supportive of sustained and inclusive economic growth.”

The revised FX rules will cover purely private sector accounts which it explained as foreign loans without guarantee or foreign exchange exposure on the part of the government financial institutions and/or government owned/controlled entities that are submitted to the BSP for approval and/ or registration.

“It will, thus, provide the private sector greater flexibility with respect to documentation of their financing agreements to meet specific requirements of creditors and/or foreign laws that may govern such transactions,” said the BSP.

This is the second FX policy liberalization move this year, so far. The first was made in February when the rules were also relaxed on private banks’ foreign borrowing plans if this relates to energy- power projects. Basically, the BSP removed the requirement of a prior BSP approval for the offshore borrowings of power- related loans without guarantee from the public sector or banks.

The central bank last month also liberalized foreign loans relating to microfinance and removed the need for a prior BSP approval as well to encourage more financing of microfinance activities as part of the government’s financial inclusion and poverty alleviation programs.

Other amendments also allowed the conversion to FX of pesos which the BSP explained are “arising from disapproved subscriptions of non-resident investors to stock rights offering of companies” listed at the Philippine Stock Exchange.

The BSP said this measure should facilitate “outward remittance of excess funds”. “(And) in the process encourage more foreign investors in investing in the Philippines.”

The central bank approved other streamlining measures that are mostly procedural in nature or clarificatory changes to the existing FX regulations.