Reuters: Regulatory News: Peru regulator eyes tighter rules on forwards as sol gains

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Peru regulator eyes tighter rules on forwards as sol gains Oct 25th 2012, 16:45 Thu Oct 25, 2012 12:45pm EDT Oct 25 (Reuters) - Peru's banking regulator is studying a rule to further limit the ability of banks to make big bets in the market for currency forwards, in what would be another bid by the government to slow the sol currency's advance. The sol has climbed to a 16-year high this year as the U.S. dollar slumps globally and the Federal Reserve keeps monetary policy exceptionally loose. Because Peru's sol is not fully convertible, some of the pressure on it has come from derivatives, especially the growing market for non-deliverable forwards, or NDFs. Under the new rule in Peru, which is still in a hearing period, banks' positions in derivatives would be limited to 20 percent of their assets as defined by regulators or 300 million soles ($116 million). Currently, the rules apply only to derivatives shorter than 90 days and allow banks ceilings of 25 percent of their assets or 500 million soles. Traders have said limits on positions in the forwards market, along with the central bank's frequent interventions on the spot market and increases in bank deposit requirements, have had a limited impact on the sol.

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