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To counteract peso devaluation, the BSP modifies the CRPP regulations.

By reducing pressure on the foreign currency spot market, the Bangko Sentral ng Pilipinas (BSP) has expanded the coverage of the Currency Rate Risk Protection Program (CRPP) in order to combat the depreciation of the peso.

Felipe Medalla, the governor of the BSP, said in a statement that the lessons learned from the peso’s decline last year against the dollar “show that spillover of risks is inevitable in an increasingly global and interconnected world.”

We believe that now is a good time to increase Filipino resilience as the peso stabilizes. It was necessary to redesign the CRPP to make it more accessible to banking customers. We achieved this by simplifying and reducing the standards and broadening the scope of transactions that qualify as acceptable FX (foreign exchange),” he said.

In 2022, the local currency was significantly impacted by volatility in the global financial market, which was partly caused by economies recovering from the epidemic, geopolitical tensions abroad, a high global inflation rate, and the direction of the central bank’s policy rates.

The BSP stated in Circular No. 1172, which was published on April 18, 2023, and was signed by Chuchi Fonacier, officer-in-charge of the BSP, that the changes to the CRPP facility’s implementation rules were authorized last March 30 by the Monetary Board (MB), which sets policy.

The CRPP facility, a non-deliverable peso-US dollar forward contract between the BSP and the universal and commercial banks (U/KBs), enables bank clients to insure their foreign currency obligations or transactions against currency fluctuations and fix the exchange rate at a predetermined rate.

According to the BSP, the facility’s document requirements have been “aligned with the existing regulations on FX transactions and have eliminated the notarial rules to enable expedited applications.”

The original trade-related coverage investments and non-trade transactions are now recognized by the new regulations as being eligible for the CRPP facility.

Other modifications to the CRPP facility rules include the removal of the 1-2 p.m. trading window, the change in maximum tenor, and the change in the applicable US dollar interest rate to be used in calculating the non-deliverable US dollar-Philippine peso forward contract rate after the use of the London Interbank Offered Rate (LIBOR) benchmark is discontinued.

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