The Central Bank of the Philippines has reminded authorized agent banks that non-deliverable foreign exchange derivatives entered for their own account and involving the sale of foreign exchange against the Philippine peso to non-resident financial institutions must be used only for legitimate economic purposes. These transactions must be backed by specific, identifiable underlying exposures and documentation, such as hedging of the bank’s own investments. Transactions for speculative positioning, directional peso exposure, or arbitrage-driven activity are not allowed. The reminder refers to Item 2 of Section 88 of the Manual of Regulations on FX Transactions, as amended by Circular No. 1212 of 11 April 2025, which broadened access to FX hedging instruments and banks’ ability to transact in FX derivatives for their own account. All new contracts and renewals involving this type of non-deliverable FX derivative must comply with the guidance. Banks are also expected to maintain adequate internal controls, governance processes, audit trails, and supporting documents to show compliance.
Central Bank of the Philippines2026-06-03
Central Bank of the Philippines reminds authorized agent banks that own account non deliverable FX sales against PHP to non resident financial institutions need documented economic purpose
The Central Bank of the Philippines reminded authorized agent banks that non-deliverable FX derivatives entered for their own account and involving the sale of foreign exchange against the Philippine peso to non-resident financial institutions must serve legitimate economic purposes and be supported by specific, identifiable underlying exposures and documentation. It reiterated that speculative, directional peso or arbitrage-driven transactions are prohibited and that all new and renewed contracts must comply with Item 2 of Section 88 of the Manual of Regulations on FX Transactions. Banks must maintain adequate internal controls, governance processes, audit trails and supporting documents.