Duterte orders DOF oversight on forex derivative activities of non-bank govt bodies

Metro Manila (CNN Philippines, May 27) - President Rodrigo Duterte has issued an administrative order directing the Department of Finance’s (DOF) to oversee the foreign exchange derivative activities of non-bank government entities.

“There is a need to institute sufficient monitoring safeguards and risk management mechanisms in FX derivatives transactions to protect the National Government’s fiscal and economic interests in non-bank government entities,” said Duterte's Administrative Order No. 48. 

Foreign exchange derivatives are investment contracts that derive value from forex rates.

The order directs covered entities to come up with investment governance frameworks - which must cover risk management, qualifications of treasury professionals, operations, controls, and accounting and reporting procedures at the minimum.

After being approved by the board of directors or trustees or the agency head, the frameworks must be submitted to the DOF for approval.

The finance secretary may disapprove or defer approval on the ground of non-compliance with requirements under implementing guidelines that will be issued for the AO, it said. These guidelines must be issued within sixty days of the order’s effectivity by the DOF head.

“Covered entities shall submit to the DOF at the end of every quarter, a report on FX derivatives outstanding, a mark-to-market valuation report, if applicable, and such other reports as may be required under the Implementing Guidelines to be formulated pursuant to this order,” read AO 48.

Signed by Duterte on May 24 but published in the Official Gazette two days after, AO 48 takes effect immediately.