BSP Amends Currency Rate Risk Protection Program Guidelines

On 19 April 2023, the Bangko Sentral ng Pilipinas (“BSP”) through its Monetary Board issued BSP Circular No. 1172 (“Circular”) on the amendments to the Currency Rate Risk Protection Program (“CRPP”) Facility and its Implementing Guidelines. The CRRP Facility is a non-deliverable USD/PHP forward contract between the BSP and a universal/commercial bank (the “Bank”) in response to the request of bank clients desiring to hedge their eligible foreign currency obligations/transactions. The Circular mainly amended Section 629 of the Manual of Regulations for Banks to include within its scope eligible foreign currency transactions. Previously, Section 629 only made mention of foreign currency obligations.  

Some affected provisions now provide that “eligible obligations/transactions under the CRPP Facility” refers to unhedged foreign currency obligations/transactions in amounts of not less than USD50,000.00 which are current and outstanding as of date of application. Past due foreign currency obligations/transactions are not eligible and the maximum tenor of the CRPP contracts is 3 months.

Previously referred to as “unhedged obligations,” under the amendment, they are now known as “unhedged foreign currency obligations/transactions” which are those without outstanding hedge, either through forward contracts, options or matched foreign currency assets. As for partially hedged foreign currency obligations/transactions, these may be subject to the CRPP Facility but are to be evaluated on a case-to-case basis.

The following supervisory enforcement actions can be employed in the performance by the BSP of post-verification of the CRPP contracts through on-site examination or off-site verification of foreign currency obligations/transactions, to ascertain their eligibility with the CRPP Facility: (i) pre-termination requested by the Bank, (ii) pre-termination requested by the BSP, (iii) post-verification of mature contracts, and (iv) other sanctions.

In availing the CRPP Facility, qualified applicants shall file an application with the Bank, together with supporting documents, for Bangko Sentral CRPP certifying that the underlying foreign currency obligation/transaction qualifies under the CRPP Facility and that such obligation/transaction is unhedged. The Bank, after reviewing the application and finding the same in order shall request the Domestic Market Operations Department (“DMOD”) under the Financial Markets to quote the CRPP rates at least 5 minutes after the close of trading of the USD/PHP market. Such quote will be made available for 1 hour after the close of trading or up to 5:00 p.m., if the trading closes at 4:00 p.m. Each application shall be dealt with by DMOD separately. The bank shall submit in hard copy or through electronic means to the appropriate supervising department of the BSP not later than 5:00 p.m. of the banking day following the date of availment of the CRPP contract, the following:

1. Copy of qualified client’s application for the CRPP Facility; and
2. Upon first application of client, Certification and Deed of Undertaking on the Availment of CRPP Transactions with the BSP (Annex 2) and Details of Availment of CRPP Transactions with Clients (Annex 2a).  

For more details and access to the pertinent annexes, the full text of BSP Circular No. 1172 can be accessed here.