THE Bangko Sentral ng Pilipinas (BSP) on Wednesday announced the approval of the implementing guidelines of its Currency Risk Protection Program (CRPP) Facility.
Under Circular No. 1014, the monetary board set the final implementing guidelines for the recently reactivated facility.
The Central Bank in early-September announced that it is reopening the CRPP after the peso broke to trade into 12-year lows during the week. The facility was first introduced as an aid to excessive foreign exchange swings during the 1997 Asian Financial Crisis.
In particular, the CRPP is a BSP-offered hedging facility through universal/commercial banks for clients seeking to hedge their borrowings denominated in foreign currency.
“The implementing guidelines set the mechanics, pricing, and requirements of the CRPP Facility. The availment process of the CRPP Facility has been rationalized to facilitate access to the same,” the BSP said in a statement.
The circular also provided for simplified documentation needed to support an application to access the Facility.
According to the BSP, this is in line with the BSP’s efforts to liberalize the foreign exchange market.
“Said documents need not be submitted to the BSP but shall be made available to the BSP during on-site examination or off-site verification, if necessary,” the BSP said.
Also, the BSP removed the daily reporting requirement on executed and preterminated CRPP contracts.
In exchange, the BSP said the new implementing guidelines now require universal and commercial banks to submit to the BSP a notarized certification and deed of undertaking stating that the bank’s CRPP transactions are in compliance with the regulation.
Corresponding sanctions have also been prescribed to promote adherence to the CRPP guidelines.
“Importantly, banks are expected to conduct the necessary client suitability assessment procedures, discuss the product information, and disclose the risks and costs associated with the non-deliverable FX forward transaction and the CRPP Facility with their clients,” the BSP said.