BSP strengthens US dollar-peso hedging facility to support corporate borrowers

The Bangko Sentral ng Pilipinas (BSP) has announced significant updates to its Currency Rate Risk Protection Program (CRPP) aimed at bolstering the peso against the US dollar and supporting corporate borrowers with foreign exchange exposures.

Originally introduced during the 1997 Asian financial crisis and reactivated in 2018, the CRPP enables bank clients to hedge their eligible foreign currency transactions and obligations through a non-deliverable US dollar-peso forward contract or NDF with the BSP and major banks.

The revised guidelines, as detailed in circular No. 1172 signed by BSP Deputy Governor Chuchi G. Fonacier, have retained the $50,000 minimum for hedging but expanded coverage to include a broader range of transactions such as outward investments and non-trade current account and resident to resident foreign exchange transactions.

The maximum tenor remains three months or 90 days.

The BSP also noted that the CRPP comes with significant benefits but warned of various risks, including counterparty, credit and enforcement, and operational risks.

The peso has recently shown some stability after a volatile period due to the US Federal Reserve’s rate hikes, and the BSP has had to revise the CRPP mechanics and pricing to account for a depreciating peso.

BSP to allow pre-termination of peso NDFs

The Bangko Sentral ng Pilipinas (BSP), is set to introduce amendments to its foreign exchange (FX) regulations, allowing for the pre-termination of peso non-deliverable forwards (NDFs).