BSP Relaxes Foreign Exchange Rules to Encourage Outflows of Capital

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The Bangko Sentral ng Pilipinas (BSP) yesterday raised the foreign exchange (FX) limits on dollar purchases from residents and the outward investments to $120,000 from $60,000 without documentation.

This is the sixth time in six years or since 2007 that the BSP has liberalized its FX policies on capital outflows to temper the peso appreciation.

The BSP also increased the amount of FX that may be purchased using unspent pesos of departing non-resident tourists or "balikbayan" to $10,000 from $5,000 without documentation BSP Deputy Governor Nestor A. Espenilla Jr., currently the central bank Governor-in-Charge, said the Monetary Board of the BSP approved the new FX policy measures to further simplify FX transactions and also to encourage the public to shift their FX transactions from the informal market to the banking system to improve data capture.

"Residents can now buy a higher amount of FX to meet the rising costs of education and medical bills incurred offshore, foreign travel, and other services, without need for documentation," Espenilla announced yesterday. "(They) will also have more investment instruments to choose from that can be funded with FX bought from banks."

As for non-residents, the BSP is giving them more options for funding their onshore peso requirements. In addition, the central bank approved a "reconversion" to FX of non-residents' onshore peso funds without prior approval from the BSP, Espenilla added.

"This latest move (in) a series of reforms initiated by the BSP since 2007 (is) to keep FX policies responsive to current economic conditions," said Espenilla yesterday during his presentation of the new FX regulations. The circulars for the new FX rules will be issued within the year.

Espenilla stressed that while the FX regulations are being formalized, they expect the banks to continue to adopt "safe and sound practices in the conduct of transactions and dealings with clients/other counterparties" as the BSP will "remain vigilant and stand ready to act to keep the FX market stable."

The BSP approved the new FX regulations as follows:

*Increase in the amount of FX that may be sold over-the-counter (OTC) by authorized banks and foreign exchange corporations to residents without documentation for services transactions (from $60,000 to $120,000 or its equivalent in other foreign currency); and

*Increase in the amount of FX that may be purchased using unspent pesos of departing non-resident tourists or balikbayan without need to show proof/s of previous sale of FX for pesos (from $5,000 to $10,000 or its equivalent in other foreign currency calculated at prevailing exchange rates). …