Recent Developments

The Bangko Sentral ng Pilipinas (the BSP, the Philippines' central bank), through BSP Circular No. 984 (Cir. 984), has recently introduced certain amendments to the Manual of Regulations on Foreign Exchange Transactions of the BSP liberalizing the regulations applicable to (among others) private sector foreign loans.

Before the effectivity of Cir. 984 (which took effect last 15 January 2018), prior BSP approval and/or registration of private sector foreign loans were generally required to enable a borrower to purchase foreign exchange from the Philippine banking system to service payment of the principal and interest on such loans. In addition, approval by the BSP (which was required to be procured even before execution of the relevant loan documents) may be given only when the proceeds of the private sector foreign loan will be used to finance eligible projects, including export-oriented projects, projects registered with the Board of Investments, priority investment areas under the Investment Priorities Plan, and others.

Under Cir. 984, prior BSP approval is no longer required for purely private sector loans that are not publicly guaranteed, though registration is still necessary to enable the borrower to purchase foreign exchange from the Philippine banking system to service payment of the principal and interest on the loan, unless the foreign loan is otherwise exempt from the registration requirement. Likewise, any private sector foreign loans may now be eligible for registration with the BSP provided that the purpose of the loan is legitimate and not contrary to laws, regulations, public order, public health, public safety or public policy.

Finally, the BSP has established a grace period to register unregistered private sector foreign loans (without guarantee from the public sector). Under BSP Circular No. 985, unregistered private sector foreign loans (without guarantee from the public sector) that are outstanding in the borrower’s records as of 22 December 2017 may now be registered with the BSP until 15 July 2018, subject to certain conditions.

Actions to Consider

Private sector borrowers who intend to obtain loans from offshore lenders should take note of this development. Further, private sector borrowers who have unregistered private sector foreign loans and
need to purchase foreign exchange from the Philippine banking system to service payments for such loans may wish to take advantage of the grace period for registration granted by the BSP.

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