The Bangko Sentral ng Pilipinas (BSP) has designated five critical payment systems as systemically and prominently important for the stability of the country’s national payment system (NPS).
To date, the BSP has designated three payment systems as systemically important payment systems (SIPS) --- these are the Philippine peso real-time gross settlement (RTGS) system, the Philippine domestic dollar transfer system (PDDTS) and the Philippine peso-US dollar payment versus payment system (PHP-USD PvP).
The BSP has also designated InstaPay and PESONet as prominently important payment systems (PIPS). Both are electronic fund transfer services. InstaPay is operated by BancNet while PESONet is run by the Philippine Clearing House Corp. (PCHC).
The peso-denominated or Peso RTGS is operated by the BSP. It settles payment transactions using demand deposit accounts maintained by banks and non-banks.
Meanwhile, PDDTS which is operated by the PCHC, enables the transfer of US dollar funds between banks in the Philippines without going through correspondent banks in the US.
The PHP-USD PvP, on the other hand, is an exchange-of-value settlement system wherein the US dollar leg is settled through the PDDTS, and the peso leg is settled through the Peso RTGS. It is also operated by PCHC.
It is crucial for the central bank to identify and designate as important or critical all payment systems that have the potential to cause systemic risks that could threaten the stability of the NPS.
By identifying the SIPS and PIPS, the BSP “implements a risk-based approach that considers both the risk profile and its impact on the NPS,” according to a report.
Basically, SIPS is a payment system that poses or has the potential to pose systemic risks that could undermine the NPS stability. PIPS, according to the BSP, is a payment system that may not trigger or transmit systemic risks but could have a major economic impact and erode the confidence of the public in the NPS or the circulation of money.
As SIPS and PIPS, the BSP said these “designations entail closer BSP supervision, including a regular assessment of adherence to the PFMI (Principles for Financial Market Infrastructures).”
The BSP has issued assessment reports for the three SIPS in 2023 while the onsite assessments of the two PIPS were released this year.
The BSP said it has also assessed two critical payment systems that are not designated. These are the check image clearing system and the automated teller machine payment system .
Although not designated, the BSP considered these as critical as the sole facility in the country that processes a particular payment stream, and both are interfaced with the BSP-operated Peso RTGS.
RTGS participants include the BSP and financial institutions maintaining settlement accounts with the BSP, as well as financial market infrastructures or FMIs, clearing switch operators, and critical service providers within the RTGS ecosystem.
The BSP’s RTGS payment system ensures the country’s smooth flow of funds and transfers. It facilitates fund transfers in financial markets where these institutions trade securities and foreign currencies for business and risk management purposes.
The BSP has previously streamlined the qualification requirements for the settlement system such as for non-bank e-money issuers and other entities with retail transactions through the RTGS. Non-banks can now transact without the need for sponsorship by existing participants.
The BSP also updated and amended the RTGS rules as a SIPS.