The Bangko Sentral ng Pilipinas (BSP) is set to approve an intraday liquidity facility (ILF) for eligible participants of the peso-denominated real time gross settlement (RTGS) payment system to ensure financial stability and the management of risks.
In a draft circular, BSP Governor Felipe M. Medalla said the BSP will provide an ILF “to ensure that payments smoothly flow through the RTGS system and that interdependent settlements are executed in a timely manner to manage systemic risk.”
The proposed rules governing ILF is currently circulated among banks and non-banks. Eligible participants are expected to submit to the BSP their comments and suggestions by Nov. 17.
Based on the draft guidelines, eligible participants to the ILF are those RTGS participants that owns National Government peso-denominated scripless securities that are “free and unencumbered and with remaining maturity of 11 days to 10 years”.
The proposed rule is that ILF may be availed of through the following modes: direct participation for eligible participants that have a direct account with the Bureau of the Treasury’s (BTr) Enhanced National Registry of Scripless Securities (NRoSS); and sponsored participation without a direct account with the BTr’s NRoSS, at which case, ILF transactions of a sponsored participant will be considered as the sponsored participant’s own transactions.
To avail of the ILF, the BSP said an eligible participant “which has transferred, either directly or through sponsorship, its eligible securities to a designated sub-account under the BSP-ILF Securities Account in the NRoSS within the prescribed period, may avail of the ILF to fund queued payment instructions in the Peso RTGS system.”
In terms of fees, the draft circular indicated that each ILF availment will be subject to the fees as determined by the BSP.
“However, to encourage availment and prompt settlement by the RTGS (payment system) participants, the Bangko Sentral shall impose no fee on availments that are settled through repurchase of securities within the prescribed business hours on the same business day the ILF is used,” said Medalla.
The RTGS, as defined by the BSP, is a system that provides real time settlement of payments, transfer instructions, or other obligations individually on a transaction-by-transaction basis.
The BSP said the RTGS payment system is “critical” in maintaining price and financial stability, as well as preserving public interest.