NextGen Day

The Bangko Sentral ng Pilipinas (BSP) is constantly collaborating with counterparts abroad to increase its capabilities as a regulator and provide the Philippines with a buffer to withstand liquidity shocks and BOP difficulties.

The two-way Bilateral Swap Arrangement (BSA) with the Bank of Japan (BOJ) was renewed beginning Jan. 1, 2022, until Dec. 31, 2024, according to BSP Governor Benjamin Diokno at a virtual briefing on Thursday.

BSP can get up to USD12 billion in short-term liquidity support from BOJ under the BSA, while BOJ can get up to USD500 million.

The BSA, according to Diokno, is a complement to the Chiang Mai Initiative Multilateralization, an ASEAN+3 financial agreement that encompasses the ten ASEAN member countries as well as China, Japan, and Korea.

While the financial agreement, which was formed in 2001, involves fees such as interest that the BSP must pay whenever it draws funds from the facility, as well as the opportunity cost of the USD500 million it has agreed to extend, he claims that “the benefits of the BSA outweigh its costs.”

The Philippines, according to Diokno, has not used the BSA because it “continues to have a solid external position, sound macroeconomic fundamentals, and sufficient policy buffers to weather external risks and vulnerabilities.”

The Philippines’ gross international reserves (GIR) were USD108.9 billion at the end of December 2021.

“We feel the BSA sends a constructive message to the market that we have sufficient funding resources to tap in the event of a necessity,” Diokno added.

The BSP has BSAs with the Monetary Authority of Singapore (MAS), Bank Indonesia, Otoritas Jasa Keuangan (OJK), Central Bank of Brunei Darussalam, Central Bank of Mauritius, and Czech National Bank, among others.

Information exchange and capacity building on fintech development, financial market laws, central bank digital currencies, and Islamic Banking, among other topics, are part of these collaborations.

The BSP has also signed a Memorandum of Understanding (MOU) with the United Kingdom (UK) for support in areas such as fintech growth, capital market development, and sustainable finance.

“We have conversations with additional central banks in the pipeline for this year, concentrating on internal audit, digital payment efforts, and cross-border businesses,” Diokno said.

Senior director of the BSP’s International Relations and Surveillance Department Maria Teresa Dueas declined to name the central banks with which the BSP is now negotiating, saying only that “negotiations are still ongoing.”

“What we can mention, however, are the areas of collaboration in these endeavors.” “All of these are focused on fintech, capital market development, and financial system development,” she explained.

According to Diokno, the country had BSAs with the central banks of Korea and China, however, both of these agreements expired in 2010.

He stated that the BSA with Korea was not renewed because “there was no common interest.”

According to Diokno, talks for a bilateral currency swap arrangement with the People’s Bank of China began in 2018.

“The goal of this agreement is to enhance bilateral commerce and investment while also providing liquidity in the event of a necessity.” Negotiations, on the other hand, were placed on hold in 2020,” he noted.

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