Bangko Sentral ng Pilipinas (BSP) Governor Felipe M. Medalla said the new rules governing the peso-denominated real time gross settlement payment system (RTGS PS) for the country’s smooth flow of funds and transfers have a much safer infrastructure for all transactions.

Medalla on Thursday, Dec. 22, said the recently approved rules covered the Principles for Financial Market Infrastructures (PFMI) which was jointly developed by the Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions. These rules comprise the first policy issuance of the BSP in its capacity as the RTGS PS operator under Republic Act No. 11127 or the National Payment System Act (NPSA).

"By complying with the PFMI, the rules aim to ensure that the RTGS PS will have in place the necessary safeguards that are in accordance with global best practices," said the BSP chief.

The PFMI has 24 principles that are compliant with the financial market infrastructures (FMIs), of which 18 are applied by RTGS PS as a systemically important payment systems (SIPS). SIPS are payment systems that pose or have the potential to pose systemic risk to the stability of the national payment system or NPS.

Last Nov. 22, the BSP issued Memorandum No. M-2022-0049 requiring all RTGS PS participants to comply with all laws and regulations on payment systems and provide for penalties and sanctions.

RTGS PS participants include the BSP and financial institutions maintaining settlement accounts with the BSP, entities that are sponsored into settlement, as well as FMIs, clearing switch operators, and critical service providers within the RTGS ecosystem.

Medalla said the new rules encourage inclusivity among RTGS PS participants. "The rules will broaden access to the RTGS PS by allowing more financial institutions to participate in this critical infrastructure for large-value payments,” he added.

The BSP has streamlined the qualification requirements such as for non-bank e-money issuers and other entities with retail transactions through the RTGS PS. Non-banks can now transact without the need for sponsorship by existing participants.

The BSP updated and amended the RTGS PS rules since as SIPS, it could have systemic risks and threaten the safety of the NPS which ensures the circulation of money or movement of funds in the country.

The November memo is “critical for maintaining price and financial stability, as well as preserving public interest,” said the BSP. The RTGS PS facilitates funds transfers in financial markets where these institutions trade securities and foreign currencies for business and risk management purposes.

Medalla in the memo emphasized that by providing the settlement facility for the open market operation, the RTGS PS “plays an indispensable role in upholding public welfare, enabling the efficient and low-risk settlement of retail payments in central bank money.”

The BSP owns and manage the RTGS PS. Besides banks and FMIs, the rules also apply to clearing switch operators (CSOs) and critical service providers (CSPs).

The Monetary Board oversees the RTGS PS Management Committee or ManCom responsible for its “safe, efficient, and reliable operation” and to make sure the SIPS is compliant with the NPS and other regulations.

The ManCom’s functions include the review of policy proposals and amendments to the operation of the payment system and to implement programs, policies, and procedures, to ensure that the operation of the RTGS PS aligns with global standards or best practices.

As defined by the BSP, the FMIs are infrastructures interlinked with the RTGS for the settlement of security, foreign exchange, and other financial market transactions.

The CSOs are clearing organizations with BSP authority to interconnect with the RTGS system while CSPs are technology companies that provide solutions vital to the operation of the RTGS PS.