Guidelines on the settlement of outstanding peso/dollar swaps of AABs with the Central Bank

CBP CIRCULAR LETTER Series of 1992

GUIDELINES ON THE SETTLEMENT OF OUTSTANDING PESO/DOLLAR SWAPS OF AUTHORIZED AGENT BANKS WITH THE CENTRAL BANK

The Monetary Board, in its Resolution No. 286 dated March 30, 1992, approved the following guidelines on the settlement of outstanding Peso/Dollar Swaps of authorized agent banks with the Central Bank:

1. The Central Bank of the Philippines will settle, value April 30, 1992 its outstanding P/$ end-user, interbank, and liquidity swaps with Authorized Agent Banks (AABs).

2. Value April 30, 1992, the Central Bank will deliver U.S. dollar to settle the aforecited swaps against the AABs' delivery of the corresponding pesos.

3. The peso equivalent of each outstanding swap with current maturities beyond April 30, 1992 to be settled or terminated will be derived using an adjusted forward P/$ exchange rate. The adjusted forward exchange rate will use the actual number of days that have elapsed from last roll-over date up to April 30, 1992, but will retain the MRR 90 and 3-month LIBOR rates in the original contracts.

4. The net amount of pesos due to be delivered by each AAB to the Central Bank under the P/$ swap (Net Payable to CB) is computed as the difference between: (a) the current peso equivalent of their outstanding swaps as computed in the preceding paragraph, and (b) the balance of their total net peso differential.

5. The total net peso differential for each swap contract is derived by adding the balance of the Peso Differential under MAAB 43 and the balance of the Interest on Peso Differential, and deducting therefrom the balance of CB's Accounts Receivable on Peso Differential.

6. Settlement of swaps of AABs that will elect settlement in US dollars will be pro-rated on the basis of the AAB's US dollar amount of outstanding swaps against the total US dollar amount of outstanding swaps of all AABs that will elect settlement in US dollars.

7. The US dollars to be paid to an AAB will be applied to settle, firstly, its end-user swaps, and then its interbank and liquidity swaps. Interbank and liquidity swaps maturing on or after, and closest to, April 30, 1992, shall be given priority.

8. For confirmation purposes, AABs that will elect to be paid in US dollars must inform the Central Bank in writing (Attn: Foreign Exchange Operations and Investments Department) not later than April 20, 1992 the specific outstanding end-user, interbank and/or liquidity swap contracts to which the US dollar payments will be applied and the remittance instructions and authority for Central Bank to debit their peso account for the US dollars to be delivered by the Central Bank.

9. Alternatively, AABs may elect to receive pesos (instead of US dollars) from the Central Bank as settlement of its P/$ swap and should signify such intention and authority for the Central Bank to transfer funds from blocked account to regular account in writing (Attn: Foreign Exchange Operations and Investments Department) not later than April 20, 1992.

10. AABs that elect to be paid in pesos will receive settlement for their total outstanding P/$ swap contracts in full. The amount of pesos to be paid by Central Bank to these AABs will be the difference between: (a) their Net Payable to CB (as discussed in paragraph 4 above), and (b) the peso equivalent of the US dollar amount multiplied by the CB's P/$ buying rate as of April 30, 1992.

11. For AABs that will not inform the Central Bank of their preferred mode of settlement as indicated in guidelines 9 and 10 above, the Central Bank will settle by delivering US dollars.

12. Full settlement of securitized interests on peso differential, including accrued interests, (evidenced by Central Bank Notes and Bonds) on all swap contracts will also be effected on April 30, 1992. Accordingly, AABs with securitized interests on peso differential shall deliver/surrender the Central Bank Notes and Bonds to the Government Securities Department, this Bank, on April 30, 1992 for redemption and payment in pesos.

13. Swap contracts that will remain outstanding will be renewed/rolled-over in the usual manner.

JOSE L. CUISIA, JR. Governor