THE PHILIPPINE central bank on Friday said it would expand the coverage of entities allowed to engage in foreign currency deposit units (FCDU) to include Islamic and digital banks.
The central bank would also streamline licensing rules on expanded FCDUs as part of changes to FCDU rules that seek to help banks manage risks, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno told an online news briefing.
The Monetary Board approved the changes under the second phase of the Foreign Currency Deposit Unit (FDCU) regulations.
“The amendments aim to promote effective risk management in banks by recalibrating the requirements for FCDU transactions in line with the current business norms and risk management practices,” he said.
“Moreover, the stringent conditions on lending to regular banking unit by expanded FCDUs will be amended to provide banks with the opportunity to perform efficient and flexible liquidity and cash management practices on their FX funds,” he said.
The BSP plans to issue a circular on the new foreign currency deposit rules.
The Monetary Board in May last year approved the first phase of reforms for the foreign currency deposit system.
The circular aimed to ease the asset cover standards of banks to improve flexibility in managing foreign currency deposit exposure. This allowed a two-week compliance period to bring the coverage back to 100%.
The two-week compliance period allows for more flexibility to manage foreign currency exposure as banks are required to keep 100% asset cover at all times on expanded FCDUs. — Jenina P. Ibañez
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