At the start of this year, a new BSP ruling imposing a cap on banks' holdings of nondeliverable forwards
(NDFs) took effect.
Importantly, the final determination doesn't extend to other FX derivatives, such as FX options, currency swaps, and nondeliverable forwards
13) A typical example in today's marketplace would include spot and forward foreign-exchange contracts including, most likely, derivative equivalents, such as nondeliverable forwards
Since the early 1990s, however, some international banks have been offering an offshore, over-the-counter market in nondeliverable forwards
(NDFs) for many emerging-market currencies, including the Chinese renminbi.
Recently, a market in nondeliverable forwards
(NDFs) has arisen to provide cover for companies trading in renminbi.
Examples of derivatives include options (including, but not limited to, options on futures contracts, on foreign currencies and on swap agreements (explained further below)), futures contracts, forward interest rate and currency contracts, nondeliverable forwards
, swap agreements (including, but not limited to, interest rate swaps; caps, floors and collars related to interest rates; total return, currency and credit default swaps), and credit-linked securities.
Also, the BSP earlier this year slapped a higher capital charge on purchases by banks of nondeliverable forwards
In January, the BSP imposed higher capitalization requirement on banks' holdings of nondeliverable forwards
(NDFs)--a hedging instrument meant for clients of banks engaged in export and import activities--to discourage excessive investments in them.