BANGKO Sentral ng Pilipinas (BSP) governor Benjamin E. Diokno announced on Thursday that the assets of banks’ Foreign Currency Deposit Units (FCDU) declined in the first half of the year, but continued to be “supportive of the local economy.”
FCDU assets amounted to $54.7 billion in June this year, lower by 2.8 percent from the previous year. FCDU assets represented 13.6 percent of the Philippine banking system’s total resources during the period.
About half of the asset pool, or $27.4 billion, were investments in debt securities issued by non-residents and the Philippine government. This was followed by loans of $21.2 billion and placements with other banks of $5.5 billion.
“FCDUs have facilitated financial intermediation and directed lending to important sectors of the economy,” Diokno told reporters. “The FCDU network also remains extensive and supportive of the country’s recovery.”
Loans of FCDUs were mostly granted to residents, which represented 70.2 percent of the FCDUs’ total loans.
Meanwhile, the electricity, gas, steam and air-conditioning supply sector had the largest share of loans to residents at 34.1 percent. This was followed by loans to the manufacturing sector at 20.7 percent, and financial and insurance activities at 14.8 percent.
“The BSP will further streamline FCDU regulations considering evolving banking regulations,” Diokno said. “The amendments will be aligned with the thrust to veer away from a compliance mindset and embed risk-based principles in all aspects of the BSP’s approach to supervision.”
FCDUs refer to a unit of a local bank or a branch of a foreign bank authorized by the BSP to accept foreign currency deposits. This is pursuant to Republic Act 6426 or the Foreign Currency Deposit Act of the Philippines, as amended.
As of end-May 2021, a total of 76 BSP supervised entities are allowed to engage in FCDU activities. These include 46 universal and commercial banks, 21 thrift banks and 9 rural and cooperative banks.
The BSP has said in 2019 that 97 percent of FCDU deposits are held by residents constituting an additional buffer to the country’s gross international reserves.