The Bangko Sentral ng Pilipinas (BSP) and the Cooperative Development Authority (CDA) have finalized a proposed joint circular that will set guidelines for cooperatives planning to operate as electronic money issuer-non-bank financial institutions (EMI-NBFIs) or operators of payment systems (OPS).
The BSP supervises and regulates money service businesses, credit granting businesses, and OPS. Under the National Payment Systems Act (NPSA), the BSP oversees payment systems in the Philippines to ensure the stability and effectiveness of the monetary and financial system.
The CDA, as per the Cooperative Development Authority Charter of 2019, is responsible for developing and regulating cooperatives by providing technical guidance, financial assistance, and other services.
The BSP and CDA drafted the joint circular as part of their October 18, 2023, memorandum of agreement (MOA) to collaborate on overseeing and supervising cooperatives licensed as EMI-NBFIs and licensed and/or registered as OPS by the BSP.
The proposed guidelines are currently being circulated among banks and non-banks, with a feedback deadline of November 15, 2024.
The BSP agreed to provide technical assistance to the CDA and cooperatives to "promote and facilitate compliance with applicable BSP issuances on OPS and EMI-NBFI activities." It will also prepare information, education, and communication campaigns to implement applicable payment rules and regulations.
The CDA will provide policy direction for implementing the standards and policies in the proposed joint circular and enforce laws and issuances related to regulating and supervising cooperatives.
According to the draft circular, implementing the 2023 MOA between the BSP and CDA "is expected to result in the adoption of a comprehensive regulatory framework that will promote an inclusive digital payments ecosystem, broader access to digital payments services, and contribute to the development of the Philippine economy."
The joint circular proposes that cooperatives engaging in EMI-NBFI activities comply with the provisions of the BSP and NPSA, such as: adopting minimum systems and controls prescribed in BSP rules; ensuring that e-money is issued and redeemed only at face value; strictly adhering to BSP regulations on financial consumer protection; observing minimum disclosure requirements under applicable BSP rules; and observing minimum liquidity requirements for EMI-NBFIs.
Cooperatives intending to engage in OPS activities must comply with the following provisions: adopting a governance structure that provides clear lines of responsibility and accountability for the Board of Directors (BOD) and senior management; meeting additional qualifications for the BOD as a governing body; appointing independent director(s); requiring BOD members to meet all qualifications and have none of the disqualifications; holding physical or virtual BOD meetings in the Philippines or abroad; and creating an Audit Committee that adheres to minimum requirements for its functions, members, and leadership.
Last year, the BSP and CDA agreed to work more closely to strengthen the supervision of cooperatives with digital payment operations. This cooperative oversight arrangement supervises cooperatives with electronic money operations.
The MOA allows the BSP and CDA to take a concurrent oversight and regulatory approach and exchange information to facilitate discharging their respective mandates.
The BSP hopes the agreement will foster a stronger, more inclusive digital payment ecosystem with enhanced oversight. The MOA more clearly defines the oversight and supervision of cooperatives that are e-money issuers and operators of payment systems, including those that deploy ATMs.