Emerging Markets Rates and Currencies Handbook

37 Citi | Emerging Markets Currencies Handbook 2021 Philippines g. peso receipts of non-residents from residents for payment of private sector foreign loans/borrowings and other loan-/borrowing-related transactions that are duly approved by/registered with/reported to the BSP (as applicable) under Section 24 of BSP FX Manual; h. peso proceeds from the onshore sale by non-resident issuers of their equity and debt securities under BSP FX Manual Section 34; and i. peso funds returned to non-residents for excess pesos arising from unrealized investments under Section 38.4 of BSP FX Manual. Non-residents may purchase foreign currency up to the amount equivalent to the balance (including accrued interest thereon) of the peso non-resident deposit accounts that are funded by eligible sources of funds subject to the submission of an Application to Purchase FX form. Peso deposits funded by item a above must have been used onshore to fund (a) private sector loans/borrowings which are duly approved by and/or registered with/ reported to the BSP in accordance with the provisions the BSP FX Manual; and (b) inward investments which are duly registered with the BSP or registering banks (as applicable) in accordance with the provisions of the BSP FX Manual. For funds not yet transferred to the resident investee relating to excess pesos arising from unrealized investments, non-resident may purchase FX in accordance with Section 38.4 of BSP FX Manual, otherwise, prior BSP approval is required. In the case of Items b, e and g, the non-resident or its authorized representative shall also present the BSRD (as required under pertinent provisions of the BSP FX Manual) for purposes of annotation of the peso amount converted to FX and reporting to the BSP of the underlying transaction. Non-resident issuers of equity and debt securities under BSP FX Manual Section 34 may purchase foreign exchange up to the amount deposited in the peso account funded by Item no. g upon presentation of the original BSP approval/ authority to purchase foreign exchange and submission of an Application to Purchase FX form. FX purchased from banks shall be remitted directly to the account of the non-resident intended beneficiary (whether onshore or offshore) on the date of FX sale. For sources of PHP funding other than those mentioned above, prior BSP approval is needed for non-residents to open a peso non-resident account and to enable the non- resident to purchase foreign currency using PHP. No approval is needed for transactions involving foreign currencies on both side of the transaction. Requirements to open a foreign currency account Subject to submission of customary account opening documents. Deal Management Rollover, Unwinding and Early Maturities of deliverable forwards are permitted, subject to the submission of mark to market form, other required supporting documents and must be duly acknowledged by the counterparty of the bank. Documentation Requirements Import Trade flows Trade transactions, excluding intercompany netting arrangements and digital payments through e-commerce market participants up to USD1MM of resident corporations (for payments to non-residents) only need to be supported by a BSP prescribed application to purchase foreign exchange. Transactions over USD1MM would need to be supported by shipping documents and invoices. Details of specific processes for FX purchase depending on payment type (i.e. open account) may be found in the BSP FX manual downloadable at https://www.bsp.gov.ph/SitePages/Default. aspx. Supporting document requirements are listed on Appendix 1.5 of the BSP FX Manual. Regardless of FCY amount purchased, application to purchase FX and supporting documents will need to be submitted to the bank to settle import trade payables under intercompany netting or digital payments through e-commerce market participants. FX forwards and swap transactions are allowed where the resident corporation is hedging market risk or covering funding requirements. Regulations does not allow double hedging at any given point in time and the total notional amount of the FX forward for swap should not exceed the amount of the underlying FX obligation. Minimum documentary requirements are listed in Appendices 18 of BSP FX Manual. The transaction is subject to Citi’s KYC processes for FX forwards where a resident corporation sells a foreign currency and buys PHP. There are generally no supporting documents required. On the other hand, supporting documents are required to be presented on or before settlement date, where a resident corporation buys a foreign currency and sells PHP. The specific documentary requirements depend on the nature of the underlying FX exposure. For swap transactions where a resident corporation sells/buys USD, the transaction is subject to Citi’s KYC policies on the first leg of the swap. The documentary requirements needed on the second leg of the swap depends on the nature of the underlying exposure. Conversely, where a resident corporation buys/sells USD, supporting documents are required to settle the first leg of the swap transaction.