Espenilla believes it’s time to say goodbye to ‘Binondo Central Bank’ rules on forex trade
Bangko Sentral ng Pilipinas (BSP) Governor Nestor Espenilla Jr. is open to implementing more reforms in foreign currencies trading as black market transactions have grown as big as the regulated deals.
“We believe this is a crucial component to sustain the economy’s growth momentum,” he said.
Espenilla said the average daily peso-dollar trading volume was pegged at $600 million. But when the central bank broaden its monitoring to include the black market, the daily average transactions have reached more than $1 billion.
“For transactions to be happening in the unregulated parallel markets, this has got to change,” said Espenilla in citing the need to implement reforms.
The central bank chief planned to make foreign exchange transactions “more risk-based but transparent.”
“Notwithstanding the waves of liberalization that the BSP has announced in the past, we recognize that the foreign exchange market today remains restrictive, difficult, opaque, shallow,” said Espenilla.
“It is a throwback to time when FX (foreign exchange) was scarce and reserves were meager and market confidence was very low,” he said referring to the Binondo Central Bank created by the former Trade Secretary Roberto V. Ongpin during martial law.
“Today, it’s an entirely different picture. To preserve those kinds of rules in a market that is rapidly growing is to impede the growth of market itself. It simply adds to cost of doing business and just creates a bigger and bigger black market,” he said.
Espenilla, who assumed his post on July 3, 2017, said foreign exchange liberalization would be a key reform under his watch.
“We will also continue to reshape the financial system so that it is truly responsive to the needs of the domestic economy. Here we have to recognize technology,” he added.
The last major foreign exchange reform was made in August 2016 when the BSP allowed Filipinos to buy as much as $500,000 from banks without supporting documents of more than four time the previous limit of from $120,000.
The ceiling on foreign exchange purchase of corporations was also hiked to $1 million. (Joann S. Villanueva/PNA)