The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) has approved the guidelines for the governance standards of operators of payment system (OPS) for the “smooth circulation of funds” among banks and electronic money issuers (EMIs).
BSP Circular No. 1127 (Governance Policy of Operators of Payment System), signed by central bank Governor Benjamin E. Diokno on Friday, September 17, will give banks and EMIs six months to comply with the new guidelines.
"The BSP recognizes the OPS (as playing) an important role in sustaining the safe and efficient flow of payments including those arising from critical financial market transactions between and among banks and non-banking financial institutions, including cooperatives,” Diokno said in the circular memo.
“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,” he said in the memo.
In a statement over the weekend, the BSP said that while the policy is about governance concerns of OPS players, the principles are aligned with the governance standards of other BSP-supervised financial institutions (BSFIs). “Meanwhile, OPS that have concurrent authorities, such as a bank or an EMI, shall abide by the more rigid requirements prescribed by virtue of such concurrent authorities,” said the BSP.
The new circular is part of the phased-in implementation of Republic Act No. 11127 or the National Payment Systems Act (NPSA). The BSP said the circular also complements the Principles for Financial Market Infrastructures (PFMI) which was issued by the Bank for International Settlements and the International Organization for Securities Commissions.
“The governance policy provides the regulatory expectations on the governance arrangements and standards to be adhered to by all OPS,” said the BSP.
The circular provides the criteria for qualification and grounds for disqualifications of all OPS elected or appointed directors or officers. “In particular, the rules prohibit concurrent directorships among a clearing switch operator (CSO), its critical service provider and the payment system management body that governs the automated clearing house for which such CSO renders clearing services,” said the BSP.
The BSP also said that more stringent requirements will apply to operators of designated payment systems “in view of the potential of designated payment systems to pose systemic risks to the financial system (and) a failure in such designated payment systems could undermine public confidence in the national payment system.”
Last week the BSP issued another circular requiring designated payment systems (DPS) to adopt the PFMI for a safer and more efficient flow of funds.
The BSP’s Peso Real-time Gross Settlement System (PhP-RTGS) using PhilPaSSplus, is the country’s first DPS as of July this year. It is the only payment system that facilitates settlement with central bank money.