Further reforms to FX rules on foreign investments

VIACHESLAV BUBLYK-UNSPLASH

On April 11, the Monetary Board approved further amendments to the Manual of Regulations on Foreign Exchange Transactions (the FX Manual) in line with the Bangko Sentral ng Pilipinas’ (BSP) commitment to further facilitate access to foreign exchange (FX) resources of authorized agent banks or their subsidiary/affiliate FX corporations (AABs/AAB forex corps) for legitimate transactions and to streamline documentary requirements, procedures, and reporting.

The FX Manual provides that a Bangko Sentral Registration Document (BSRD) shall evidence registration of investments with the BSP. Under BSP Circular No. 1192, series of 2024 however, a BSRD shall no longer be issued for the following foreign investments registerable with AABs/AAB forex corps under Section 37 of the FX Manual: a.) debt securities issued onshore by the National Government and other public sector entities; b.) equity securities issued onshore by residents that are listed at an onshore exchange (e.g., the Philippine Stock Exchange); c.) debt securities issued onshore by private sector residents that are listed at an onshore exchange and not covered by the provisions of Part Three, Chapter I of the FX Manual (Loans/Borrowings and Guarantees); d.) exchange-traded funds issued/created onshore by residents; e.) Philippine Depositary Receipts that are listed at an onshore exchange; f.) Peso time deposits with an AAB with a maturity of at least 90 days; g.) Equity securities issued onshore or offshore by non-residents that are listed at an onshore exchange; h.) debt securities issued onshore by non-residents that are listed at an onshore exchange; and, i.) instruments under Section 37.1 (a-h) [listed above] used as collateral involving transfer of legal/beneficial ownership of the collateral to the non-resident investor.

The abovementioned foreign investments shall now be considered registered upon: (i) submission by the non-resident investor, or his duly authorized representative to the registering AAB of the applicable supporting doc-uments (i.e., proof of funding and investment made) under Appendix 10.C of the FX Manual and a duly accomplished “Authority to Disclose Information” form under Appendix 10.4 of the FX Manual; and, (ii) reporting thereof by the registering AAB to the BSP using the Report on Foreign Investments Registered with the BSP through AABs and confirmation of receipt of the report submitted by the registering AAB to the BSP.

Other requirements and reporting guidelines are discussed in detail in Appendices 10.B and 10.C of the FX Manual.

The dispensing of the issuance of the BSRD for the instances covered by Section 37 of the FX Manual is a welcome development to the FX rules as it allows for greater flexibility for non-resident investors to source FX in the Philippines which, in turn, promotes a more conducive environment for foreign investments to support economic development.

It must be noted, however, that a BSRD will still be issued for foreign investments registerable with the BSP under Section 36 of the FX Manual. Among others, this would include foreign direct investment such as assigned capital and operational working fund for onshore branches/regional headquarters/regional operating headquarters and offices/representative offices and contributed capital for onshore partnerships/joint ventures.

The Circular provides for a transitory period until Sept. 30 to allow registering AABs to make the necessary preparations and adjustments to their systems and processes to ensure compliance with the new reporting guide-lines. As such, the registering AABs shall submit to the BSP-International Operations Department (IOD) the list of existing and valid BSRDs issued by them as of Jan. 31 within 15 banking days from the issuance of the Circular, while BSRDs issued from Feb. 1 until the day prior to the effectivity of the Circular must be reported within two banking days from registration date or prior to the effectivity date of the Circular (whichever is earlier). Upon the effectivity of the Circular until Sept. 30, registering AABs shall continue to report the transactions of registered investments under Section 37 of the FX Manual using the old report forms. The submission of the revised report forms shall commence on Oct. 1.

The views and opinions expressed in this article are those of the author. This article is for general informational and educational purposes only and not offered as and does not constitute legal advice or legal opinion.

Christine Joy S. Escalente is an Associate of the Corporate and Special Projects Department of the Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW)

csescalante@accralaw.com

8830-8000