A functional repurchase and reverse repurchase (repo) market will finally be launched next week as part of efforts to accelerate financial sector reforms, Bangko Sentral ng Pilipinas (BSP) Governor Nestor Espenilla Jr. said on Monday.
“A major BSP strategic policy reform is to accelerate financial market development, with special focus on the local currency debt market and foreign exchange (FX) market,” Espenilla said in a speech during awarding ceremonies for the Financial Executives Institute of the Philippines’ (Finex) CFO of the year.
“We envision a more balanced financial ecosystem where a well-functioning banking system is complemented by a deep and liquid capital market,” he added.
Repo transactions involve the sale of securities on a short-term basis. Espenilla last month said he was looking forward to the “first trade in the repo market” by November.
“There’s much room for growth in the domestic debt market. The numbers show that the outstanding local currency bonds represent a mere 34.2% of the country’s GDP (gross domestic product) today,” he said during the Finex event.
The launch of the repo program, Espenilla said, is part of a coordinated effort by the BSP, Department of Finance, Bureau of the Treasury (BTr) and the Securities and Exchange Commission (SEC).
“The reforms are geared towards increasing transparency in the issuance and pricing of government bonds that would translate into increased efficiency, lowering costs, and more dynamic participation,” he said Espenilla.
A self-regulatory organization (SRO) has already been approved by the SEC while the BTr is focusing on inter-dealer rules.
“For us, we will have to zero out the reserve requirement. These are the pieces coming into play, all of that comes together when we launch on November 27,” Espenilla said.
The Bangko Sentral chief said monetary authorities were also “overhauling” foreign exchange regulations to achieve more efficiency and ease of doing business in the Philippines.
Draft rules related to FX loans and offshore loans of the private sector will soon be released.
“This will refocus the registration process to primarily data gathering and minimized documentary requirements,” Espenilla explained.