BSP enhances guidelines on currency rate risk protection program

The CRPP is a hedging facility offered by the BSP through universal/commercial banks for clients who are seeking to hedge their borrowings denominated in foreign currency. (File Photo: Bangko Sentral ng Pilipinas/Facebook)

MANILA — The Monetary Board (MB) approved the enhanced guidelines on the Currency Rate Risk Protection Program (CRPP) aimed at easing the demand pressures in the foreign exchange spot market, the Bangko Sentral ng Pilipinas (BSP) disclosed in a statement over the weekend.

The CRPP is a hedging facility offered by the BSP through universal/commercial banks for clients who are seeking to hedge their borrowings denominated in foreign currency.

The CRPP Facility is a non-deliverable USD/PHP forward (NDF) contract between the BSP and a universal/commercial bank. In an NDF contract, only the net difference between the contracted forward rate and the spot rate shall be settled in pesos upon maturity of the contract.

Obligations eligible under the CRPP facility are the unhedged foreign currency obligations in amounts of not less than USD50,000.00 that are current and outstanding as of the date of application. These include the following: (a) BSP-reported/registered short-term (ST) trade-related loans from eligible banks; (b) medium/long-term trade-related FCDU/RBU loans with payments maturing within 90 days as of date of application; (c) ST trade-related borrowings of oil companies from offshore banking units (OBUs); and (d) US dollar trust receipts, among others. The maximum tenor of the CRPP contract is 90 days with option to reavail.

To facilitate the transactions under the CRPP facility, the BSP provides various regulatory relief. Exposures under the CRPP facility shall not be subject to NDF position limits. Moreover, reduced market risk capital charges shall be applied for net open positions for NDFs under this facility. Universal banks/commercial banks also do not need additional derivatives authority since transactions under the CRPP are considered generally authorized derivatives activities.

The terms, conditions and the reporting requirements of the CRPP Facility will be covered by a separate issuance on the implementing guidelines of the CRPP Facility