January 27, 2023

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BSP issues rules for peso payments

THE Bangko Sentral ng Pilipinas (BSP) has issued rules for participants in the Peso “Real Time Gross Settlement Payment System” (RTGS PS), an infrastructure that provides real-time settlement of payments, remittance instructions or other obligations on a transaction-by-transaction basis -Transaction basis.

The BSP said in a draft circular that the RTGS PS is “vital to maintaining price and financial stability and safeguarding the public interest”.

“This payment system ensures the smooth flow of money between financial institutions that maintain sight deposits or settlement accounts with BSP,” says the draft circular. “It also facilitates money transfers in financial markets where these institutions trade securities and foreign currencies for business and risk management purposes.”

The BSP added that RTGS PS supports the central bank’s mandate to ensure price stability.

“In addition, this system makes an indispensable contribution to safeguarding the common good by enabling efficient and low-risk processing of retail payments in central bank money.”

In this regard, the Central Bank has adopted the rules for the operation of the RTGS PS.

The rules cover the first policy issuance by BSP in its capacity as RTGS-PS operator under Republic Act 11127 (National Payment System Act).

Necessary protective measures

THE BSP said the newly approved rules conform to the Principles for Financial Markets Infrastructures (PFMI) developed jointly by the Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions.

“By complying with the PFMI, the rules are intended to ensure that the RTGS PS has the necessary safeguards in place, consistent with global best practices,” said BSP Governor Felipe M. Medalla.

The PFMI consists of 24 principles that apply to financial market infrastructures (FMIs), 18 of which concern systemically important payment systems such as the RTGS PS.

The rules issued under BSP memorandum M-2022-0049 dated November 22, 2022 require all RTGS PS participants to comply with all payment system laws and regulations and provide for penalties and sanctions.

RTGS-PS participants include the BSP and financial institutions holding settlement accounts with the BSP, entities sponsored in settlement, as well as FMIs, clearing switch operators and critical service providers within the RTGS ecosystem.

Promote inclusion

Aside from formally bringing RTGS-PS operations up to international best practices, the new rules aim to promote inclusion among RTGS-PS participants.

“The rules will expand access to the RTGS PS by allowing more financial institutions to participate in this critical infrastructure for large-value payments,” Medalla said.

To this end, the BSP has streamlined the qualification requirements for potential members of the real-time payment system. As a result, non-bank e-money issuers and other businesses can now settle their retail transactions through the RTGS PS without the need for sponsorship from existing participants.

Last year the BSP designated the RTGS PS as SIPS under the NPSA. SIPS are payment systems that pose or may pose a systemic risk to the stability of the national payment system.

SIPS are subject to regular assessment and stricter monitoring by the BSP to better protect the public interest and promote trust in the use of payment systems.