BSP expands list of systemically important payment systems
The Bangko Sentral ng Pilipinas (BSP) has approved the designation of the Philippine Domestic Dollar Transfer System (PDDTS) and PhP-USD Payment vs. Payment System (PvP) as systemically important payment systems (SIPS).
This brings to three the BSP-identified SIPS which are payment systems that have the potential to pose systemic risk that will threaten the stability of the national payment system (NPS).
In July last year, the BSP’s Peso Real-time Gross Settlement System (PhP-RTGS) using PhilPaSSplus, became the first SIPS and designated payment system (DPS).
A BSP memo (Memorandum No. M-2022-013), signed by BSP Governor Benjamin E. Diokno last Wednesday, March 2, has directed all participants of PDDTS and PvP to comply with the BSP’s regulatory expectations under BSP Circular No. 1089 or the Payment System Oversight Framework (PSOF) as a DPS.
“As participants of the DPS, subject recipients (PDDTS and PvP) are expected to contribute towards observance (of) the Principles for Financial Market Infrastructures' (PFMI) relevant to SIPS,” according to the memo.
The PFMI was developed by the Bank for International Settlements (BIS) and the International Organization of Securities Commissions. It has 24 principles applicable to financial market infrastructures such as payment systems, central securities depositories, securities settlement systems, central counterparties, and trade repositories.
The PhP-RTGS has already adopted PFMI with the implementation of new technology in the infrastructure of PhilPaSSplus in 2021.
The BIS defines SIPS as a payment system “which has the potential to trigger or transmit systemic disruptions”. As such, all SIPS and prominently important payment systems (PIPS) are mandated to adopt the PFMI. The PFMI is crucial as it is expected to strengthen financial stability in the country. It is also expected to improve efficiency in payment systems, resulting in more payment options.
PIPS, meantime, may not trigger or transmit systemic risk but could have a major economic impact, or undermine the confidence of the public in the NPS or the circulation of money.
Based on the circular letter, PDDTS and PvP are expected to comply with guidelines such as its participation to BSP surveys to assess safety, efficiency, and reliability of the payment system, including the performance of service by the operator of the designated payment system (ODPS); and to submit reports and/or information as required or requested by the BSP to facilitate evaluation of the PDDTS, the PvP and/or the NPS.
Designated SIPS are also expected to be available during regular onsite examination/assessment conducted by the BSP with prior written notification, relevant documents and information to evaluate the activities related to the payment system. They are also expected to provide necessary information as requested by the ODPS to facilitate compliance with reporting requirements under relevant laws and regulations.
PDDTS and PvP are likewise expected to do follow these: to adhere to the rules, standards and requirements of the BSP to ensure its safety, efficiency, and reliability, including participation in exercises or activities, such as testing conducted by the ODPS; and to comply with BSP policy issuances primarily directed at all participants of a payment system or specific to their role in the PDDTS and PvP.