Law Summary
1. Approval Types for Financial Derivatives Activities
- Legal Principle/Provision: The Bangko Sentral ng Pilipinas (BSP) has established two distinct types of approvals for entities wishing to engage in financial derivatives activities.
- Key Details:
- Regular Type: Specifically for currency swaps and forwards.
- Expanded Type: For all other kinds of derivatives transactions.
2. Definitions of Key Financial Instruments
- Legal Principle/Provision: The document defines critical financial terms to clarify the scope of financial derivatives.
- Key Definitions:
- Currency Swap: A transaction involving the simultaneous purchase and sale of a currency for different maturity dates with the same party, exclusive of other contracts.
- Currency Forward: An agreement between two parties to exchange currencies at a specified future date, necessitating actual delivery beyond the spot contract settlement date.
3. Requirements for Authority to Engage in Financial Derivatives
- Legal Principle/Provision: Authorization to engage in financial derivatives is contingent upon compliance with pre-qualification criteria established in prior regulations.
- Important Requirements:
- Compliance with Section 3 of Circular No. 102 is mandatory.
- For the regular type of derivatives transactions, specific items (a) and (h) from the pre-qualification requirements do not apply.
- Relevant Timeframes: The document does not specify any deadlines or expiration details for the applications or approvals.
4. Adoption and Authority
- Legal Principle/Provision: The guidelines were officially adopted by the BSP Governor, indicating their formal and binding nature.
- Important Details:
- Adoption Date: May 30, 1996.
- Authority: Signed by Governor Gabriel C. Singson.
Key Takeaways
- The BSP has delineated two types of approvals for financial derivatives: regular (currency swaps and forwards) and expanded (other derivatives).
- Clear definitions are provided for critical terms such as "currency swap" and "currency forward."
- Compliance with pre-qualification requirements is essential for obtaining authority to engage in derivatives activities, with specific exemptions noted for the regular type.
- The guidelines were officially adopted on May 30, 1996, establishing regulatory clarity and authority for financial derivatives in the Philippines.