MANILA, Philippines - The Bangko Sentral ng Pilipinas and the Bank of Japan announced the creation of a facility allowing banks in the Philippines to exchange their yen holdings for peso.
In a statement, the BSP said this cross-border liquidity arrangement is seen improving the financial stability in the Philippines.
This facility will allow eligible banks in the Philippines to acquire pesos from the BSP through selling or repurchasing Japanese yen.
The BSP noted this will give eligible lenders including Japanese banks in the country more alternatives for their liquidity needs.
“This collaboration reinforces BOJ and BSP’s commitment to support the long-standing economic and financial relationship between Japan and the Philippines,” the BSP said.
Specific details of the arrangement will be announced soon, when preparations are completed, the BSP added.
The BOJ and BSP in October last year signed an enhanced bilateral swap agreement to increase their countries’ buffers against external shocks.
Under the arrangement, the Philippines can swap up to $12 billion, while Japan can swap up to $500 million.
Bilateral swap agreements allow countries to pledge a sum of funds the other can use in times of a liquidity crunch.