Central bank regulations that effectively closed down the Philippine foreign exchange derivatives market could be lifted in the coming months. The Bankers Association of the Philippines has been working with its members and Bangko Sentral ng Pilipinas to ease restrictions on the maturity of derivatives transactions. Mark Andaya, consultant at the association, predicted the regulations would be softened in the coming months.
The restrictions were introduced in March in an attempt to reduce movements in spot. This caused the market to come to a grinding halt, according to John McGowan, treasurer at HSBC in Makati City. Banks could only offer fx swaps and forwards up to six months and because the majority of the demand is for liability management on foreign currency denominated borrowings, the area dried up.
McGowan said that once any maturity of fx derivatives can be traded, it will bring clients back. "There's a lot of firms onshore that have genuine needs for hedging fx exposure," he said.
Paul San Pedro, treasurer at ABN AMRO, said, "It will be a big positive for us." Ciriaco Dator, head of banking group sector two at the BSP in Manila, confirmed that the central bank is working on a circular but declined further comment.
