Philippine Banks Approve New Financial Measures to Boost Peso

By Karl Lester M. Yap

Oct. 31 (Bloomberg) -- Philippine commercial banks have agreed three new financial measures to help boost the peso and increase liquidity in the system.

All 38 members of the Bankers Association of the Philippines ``voluntarily'' cut by half the so-called overbought limit, the ceiling on the amount of foreign exchange lenders can hold in excess of foreign-currency liabilities, according to a document sent to member banks today, a copy of which was obtained by Bloomberg News. The maximum overbought limit is $50 million.

Banks also agreed to ``exercise due diligence and limit the sale of dollars'' for foreign direct investment, the document said. Philippine residents are allowed to take out of the country a maximum of $30 million without having to seek central bank approval.

``These measures will lessen speculation on the peso,'' said Rafael Algarra, treasurer at Security Bank Corp. in Manila. ``If there is real dollar demand, we cannot do anything about it.''

Banks also agreed to ``actively use'' the collateralized peso loan facility between lenders to boost liquidity, the document said.

``This will improve movement of money around from one bank to the other because it uses less credit lines as it is collateralized,'' Algarra said.

The peso, which has fallen more than 15 percent this year, is headed for its worst annual loss since 2000 as the global financial crisis continues to rattle financial markets.

To contact the reporter for this story: Karl Lester M. Yap in Manila at kyap5@bloomberg.net.