Governance standards for payment system operators set

THE CENTRAL BANK has set governance standards for operators of payment systems (OPS), including qualifications for officials and possible grounds for termination.

Circular 1127 signed by Sept. 17 also imposed stricter rules for OPS that engage in other businesses regulated by the Bangko Sentral ng Pilipinas (BSP).

“The guidelines set governance standards that prescribe the quality of stewardship among OPS given that these entities have critical roles in ensuring the smooth circulation of funds in the economy in a safe, efficient, affordable and convenient manner,” the central bank said in a statement.

The circular is applicable to the BSP as the operator of the real time gross settlement system of PhilPaSS Plus. It likewise covers BSP-supervised financial institutions, including banks, nonbank financial institutions, nonbank electronic-money issuers, cooperatives, and other businesses that are considered OPS under central bank regulations.

All OPS are required to comply with a risk appetite statement which details the types of risks they are willing to accept and avoid in order to keep their business objectives. This should include statements that report measures on systemic, financial, and operation risks that could build up through the course of their business.

A risk government framework that lays out the business strategy that will be adopted by a firm’s board of directors will also be required.

The circular requires an OPS to have a board of directors composed of 5-15 members. One of them or at least 20% of the board should be independent directors.

Foreigners can be part of the board of directors of an OPS except for cooperatives, to the extent provided by existing laws and regulation.

An OPS is also expected to have an audit, risk oversight, and corporate governance committees that will oversee their operational and financial reporting processes and look into concerns of malpractice and resulting investigations, if needed.

Under the circular, directors and officers could be subject to either permanent or temporary disqualification. Persons will be permanently disqualified from assuming officership in an OPS if they were convicted by