BSP allows small banks to buy, sell foreign exchange

MANILA, Philippines - The Bangko Sentral ng Pilipinas has allowed thrift, rural and cooperative banks to buy and sell foreign exchange.

“This will enable these banks to play a more active role in the remittance business,” the BSP said.

The BSP’s policy-making Monetary Board approved amendments classifying thrift, rural and cooperative banks as authorized agent banks, the only category of banks allowed to buy and sell foreign exchange as part of the services they can offer their clients.

The BSP said banks should also comply by applicable provisions of the Manual of Regulations for Foreign Exchange Transactions.

Moreover, they should manage risks that may come up from this new service.

“While it is recognized that the buying and selling of foreign exchange will entail additional market risks, ample prudential safeguards are in place,” the BSP said.

“Monitoring of foreign exchange exposures are adequately captured in the BSP prudential reports and the extent of thrift, rural and cooperative banks’ compliance and assessment of risk management, and risk exposures are evaluated during the BSP on-site examination,” the central bank said.

FX forwards are contracts for an exchange of one currency against another at a specified rate and date days after the deal.

The BSP said thrift banks interested to be a dealer of deliverable FX forwards will be subject to the existing licensing process.