Group of major banks launches dollar-peso cross currency swap

By Julito G. Rada

THE Bankers Association of the Philippines, the lead organization of universal and commercial banks, said Monday it launched the dollar-peso cross currency swap market in line with its commitment to promote market development in the country.

The 44-member BAP said in a statement the initiative, spearheaded by the BAP Open Market Committee, enables its members to utilize hedging instruments critical to them and in response to the needs and requirements of their customers to better manage foreign exchange and interest rate risks.

“The BAP Open Market Committee, with the strong support of the Money Market Association of the Philippines and ACI Philippines, ensures that the USDPHP CCS market is guided by the rules and regulations of the Bangko Sentral ng Pilipinas as well as the adoption of the ISDA Master Agreement and Foreign Exchange Global Code,” BAP said.

Market makers in the dollar-peso cross currency swap market include BDO Unibank Inc., Bank of the Philippine Islands, Metropolitan Bank & Trust Co., Philippine National Bank, Security Bank, Ci- tibank, DB, Hongkong and Shanghai Banking Corp., ING Bank, JP Morgan and Standard Chartered Bank.

Banks that signed up as regular participants include China Bank, Rizal Commercial Banking Corp., Robinsons Bank, Union Bank of the Philippines, ANZ, Mizuho and MUFG.

Voice-broker participants in the market include Amstel, GFI, Tradition and Tullet Prebon.

A cross currency swap is a transaction between two authorized parties that involves an exchange of principal amounts and interest payments in one currency for principal and interest payments in another currency at an agreed upon exchange rate and at an agreed schedule.

The USDPHP CCS market involves a Philippine peso fixed rate and a US dollar floating swap with standard tenors of