Bank Rolls Out Innovative Interest Rate Swap Market

The Bankers Association of the Philippines (BAP) officially launched the upgraded Peso Interest Rate Swap (IRS) market on Monday, November 18, 2024. Designed to enhance the process of setting and managing interest rates, this new market provides significant benefits to both banks and borrowers. It is particularly advantageous for businesses reliant on loans, as it ensures that interest rates reflect actual market conditions.

This initiative aligns with updated guidelines from the International Swaps and Derivatives Association (ISDA), issued on November 15, which incorporate the Philippine Overnight Reference Rate (ORR). The ORR, derived from the Bangko Sentral ng Pilipinas' (BSP) overnight borrowing rate, forms the cornerstone of this revamped system.

BAP (Bankers Association of the Philippines) President Jose Teodoro Limcaoco emphasized that this new development, coupled with other financial reforms, will play a key role in expanding the Philippine capital market. It will also provide businesses with enhanced tools for effectively managing loans and investments.

Meanwhile, the Bangko Sentral ng Pilipinas (BSP) expressed its support for the launch of the new swap market, calling it a crucial step in strengthening trading activity and liquidity within the local bond market.