Derivatives house of the year, Philippines: Bank of the Philippine Islands (BPI)

Risk Asia Awards 2025

Donarber N Pineda, BPI

Buoyant economic conditions have prevailed in the Philippines since early 2024, with strong growth and falling inflation pinning the country as one of South-east Asia’s most resilient economies. Even so, a widening trade deficit, uncertainty over US monetary policy and geopolitical tensions translated into sharp swings in the Philippine peso and bouts of volatility across foreign exchange markets.

For the Bank of the Philippine Islands, this environment has created new opportunities. Corporates seeking dollars for acquisitions, imports and funding needs, together with increased sovereign debt issuance in hard currency, have driven fresh foreign exchange demand that the bank addressed through its structured solutions, including both standard derivatives and more tailored offerings.

“In recent years, new FX requirements have emerged in the Philippine market. Corporates now need dollars to acquire offshore assets, or even local assets priced in US dollars, while foreign currency government debt auctions have also become more common,” says Donarber N Pineda, senior vice-president, head of global markets sales at BPI.

This rising FX demand has been particularly visible in the country’s expanding clean energy sector, where BPI has played a leading role in transactions for renewables and liquefied natural gas (LNG). In early 2024, the Philippines’ largest renewable energy company won the auction for a 165MW hydroelectric plant, among the largest state power assets to be privatised under the current administration.

BPI arranged over $100 million in FX forwards, with maturities of one to two months, to meet the dollar-denominated contract. By locking in rates ahead of settlement, BPI says the client saved around ₱0.30 per dollar as the greenback strengthened against the peso. The acquisition ultimately expanded the company’s clean energy portfolio to more than 3.6GW across solar, hydro, wind and geothermal generation.

In February 2024, BPI secured the FX mandate for the Philippines’ first integrated LNG facility. The rapid turnaround allowed the client to hedge over $300 million in forwards, purchased in tranches at below 56 peso levels. The hedges, which ran from the first half of 2024 through to completion in early 2025, protected the project from sharp market swings and highlighted BPI’s agility in volatile FX conditions.

More generally, BPI has enjoyed broad growth in its derivatives business, reinforcing its position as a leading provider of risk management solutions in the Philippines.

Derivatives turnover in 2024 was up about 50% year on year, reflecting strong demand across forwards, swaps and structured strategies. FX forwards rose 66%, FX swaps increased 36%, and the bank’s hedge investment strategy more than doubled in volume, up 134% year on year.

Meanwhile, FX and derivatives volumes linked to imports climbed 17%, outpacing the country’s import growth of just 1.1% over the same period, according to data from the Philippine Statistics Authority.

Behind these headline figures, certain products have been particularly useful for corporate clients dealing with volatile market conditions. Swaps remained a core driver of activity as corporates used the market to manage peso liquidity and funding needs, while forwards surged as clients sought protection from heightened volatility over the course of 2024.

The bank says its hedge investment strategy, which combines fixed income with derivatives to manage rate and FX risk, gained momentum by pairing longer-dated instruments such as Republic of the Philippines bonds and US Treasuries with cross-currency swaps, allowing clients to enhance yields while protecting capital.

Cross-currency swaps, as a standalone offering, also proved valuable for corporate funding: in one landmark deal, BPI helped a leading Philippine conglomerate convert a floating rate yen loan into a fixed rate peso liability, achieving an all-in cost below domestic BVAL (Bloomberg Evaluated Pricing Service) benchmarks.

BPI also executed large, time-sensitive mandates during the review period. In late 2024, it hedged over $250 million of a foreign currency loan for a major construction materials company, completing the deal efficiently despite a short timeline and the scale of the ticket.

According to Pineda, a further differentiator for BPI is its regulatory standing in the Philippine market. It remains the first and only local bank to hold a Type 1 derivatives licence from the Central Bank of the Philippines, which it obtained in 2020. The licence allows BPI to transact any derivative without prior regulatory approval.

As such, the Type 1 licence has supported the expansion of BPI’s hedge investment strategy and strengthened its ability to deliver innovative solutions.

Pineda also notes the organisation of BPI’s Global Markets business has been a key component of its growth, combining a proprietary trading desk that formulates strategies across FX, fixed income and derivatives with a sales desk that distributes these solutions to different clients.

The setup means that BPI can generate market views internally and develop tailored client solutions quickly, giving it an advantage in a crowded domestic market.

BPI’s derivatives sales unit is a particular standout. BPI is the only local bank with a dedicated team of derivatives specialists, offering clients a broad range of support, from trade execution to pre-deal documentation, to strategy development and post-trade support.

Meanwhile, the digitalisation of BPI’s business has been gathering pace. Around 30% of FX transactions are now executed through electronic platforms such as Bloomberg and Refinitiv, a change that the bank says is giving clients faster and more competitive access to pricing.

BPI has also integrated FX services into its in-house BizLink platform for corporates and added FX functionality to the BPI mobile app for individuals, allowing clients to purchase foreign currency seamlessly without going through a branch.

BPI links these achievements to a client-centric approach that places as much emphasis on trust and long-term relationships as on pricing. By working closely with corporates and institutions, the bank reckons it has positioned itself as a reliable partner amid volatile conditions.

That positioning has also allowed BPI to connect its derivatives work with broader economic priorities, from supporting renewable energy and infrastructure projects to contributing to the development of the Philippine financial system.