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April 12, 2024

Remolona eyes European model to rejuvenate Philippine swap market

Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona Jr. has unveiled plans to invigorate the nation’s swap market, focusing on the vital role of market making, especially for instruments with a five-year maturity period.

Remolona pointed to the European market’s organic development of a swap curve as a model, suggesting the Philippines could adopt a similar strategy to enhance its financial markets.

Swaps, which are derivatives allowing for the exchange of asset values or cash flows, primarily operate over the counter.

Remolona emphasized the significance of establishing a swap curve in the Philippines to support market making activities, citing the challenges posed by the absence of a strong repurchase (repo) market in the country.

Although the Global Master Repurchase Agreement (GMRA) exists, Remolona noted its limited impact within the Philippine financial landscape, indicating a need for tailored solutions to bolster the effectiveness and efficiency of the local swap market.