The Bangko Sentral ng Pilipinas (BSP) has made additional moves to strengthen financial market infrastructures against financial crises and for the implementation of a governance policy for payment system players.

The two proposed circulars are already out for comments and suggestions from the banking industry.

The BSP has set January 15, 2020 as deadline for feedbacks for the two drafts, namely, the “Governance Policy Guidelines for Operators of a Payment System (OPS)” and the “Adoption of the Principles for Financial Market Infrastructures (PFMI)”.

The proposed PFMI is for designated payment systems (DPS) including the BSP as per BSP Circular No. 1089 or the Payment System Oversight Framework (PSOF), and Republic Act No. 11127 or the National Payment Systems Act (NPSA).

The PFMI is defined as a set of international standards to “strengthen financial market infrastructures (FMI) and make them more resilient to financial crises, and participant defaults.” The BSP said that the standards are principles-based but “also provide specific minimum requirements to achieve the same base level of risk management across different FMIs and countries.”

In the draft circular, the BSP said that to ensure the safety, efficiency and reliability of the national payment system (NPS), it will require DPS to adopt the PFMI and also for the BSP to “utilize the PFMI assessment methodology to determine the observance of relevant principles by the DPS as well as identify possible risks and induce changes in the NPS.”

The proposed circular is part of the BSP’s second phase of its policy development and regulatory framework to implement the NPSA.

Part of this second phase is issuance of another proposed circular or supplemental regulations anchored on the PSOF, which is the main policy of the NPSA.

According to the BSP, one of these regulations is the governance policy for OPS, which has been presented to banks as draft in mid-December.

 “This proposed policy provides the regulatory expectations on the governance arrangements and standards to be adhered to by all OPS, including the BSP, being the operator of the country’s real time gross settlement system,” said the BSP.

The draft circular contains criteria for the qualification and grounds for disqualifications of OPS elected or appointed as directors or officers.

The BSP said the proposed policy is “largely” patterned after what it already implements as corporate governance standards and the governance provisions of existing laws such as the Revised Corporation Code of the Philippines, the Code of Corporate Governance for Publicly Listed Companies, and the Cooperative Code of the Philippines. The proposed policy is also aligned with the globally recognized PFMI, said the BSP.

“The BSP recognizes that the OPS play an important role in sustaining the safe and efficient flow of payments including those arising from critical financial market transactions between financial institutions. Being generally responsible for interlinking these institutions that execute payment orders in their normal course of business, the OPS are also crucial in maintaining the public’s confidence in the financial system,” said the BSP in the draft circular.

By law and by BSP’s definition, an OPS is a person that performs any of the following functions: maintains the platform that enables payments or fund transfers, regardless of whether the source and destination accounts are maintained with the same or different institutions; operates the system or network that enables payments or fund transfers to be made through the use of a payment instrument; and provides a system that processes payments on behalf of any person or the government.