Manila Bulletin

BSP cites role of RTGS in payment system

- By LEE C. CHIPONGIAN

The Bangko Sentral ng Pilipinas (BSP) has identified the Philippine Peso Real-Time Gross Settlement (PhP-RTGS) payment system, which it owns and operates, as a systemical­ly important payment system (SIPS).

This means the PhP-RTGS as SIPS is a payment system “which poses or has the potential to pose systemic risk that could threaten the stability of the National Payment System (NPS).” The NPS ensures the circulatio­n of money or movement of funds in the country.

Based on a BSP Circular Letter approved on August 13, all registered non-bank payment system operators with its Philippine Payment and Settlement System (PhilPaSSpl­us) will now have to comply with provisions under the BSP’s Payment System Oversight Framework or PSOF (Circular No. 1089 of 2020). This is a must now that PhP-RTGS is a SIPS.

BSP Governor Benjamin E. Diokno, in the circular memo he signed last Friday, said that that participan­ts of a designated payment system or DPS, nonbank OPS will “contribute” in the PhP-RTGS compliance with SIPS principles. They will do this by complying with seven guidelines.

These guidelines basically set the rules and provisions to follow as OPS participat­ing in a SIPS, including the submission of required reports to help BSP in its assessment of the PhPRTGS.

“The BSP may perform validation of compliance of any of the guidelines at any time, as deemed necessary,” said Diokno.

The BSP’s PSOF, approved last July 2020, ensures a safe and efficient NPS which is crucial to the smooth functionin­g of financial markets and the stability of monetary and financial systems.

Identifyin­g SIPS is one the provisions of the PSOF, and also in naming prominentl­y important payment system or PIPS which BSP has yet to do. A PIPS is different from a SIPS in that the latter is described as a payment system that may not trigger or “transmit systemic risk but could have a major economic impact or undermine the confidence of the public in the NPS or in the circulatio­n of money.”

The Switzerlan­d-based Bank for Internatio­nal Settlement­s (BIS) issued the guidelines for the SIPS. A BIS paper said SIPS are an “essential mechanism supporting the effectiven­ess of financial markets (but) they can also transmit financial shocks.” This is particular­ly true for “poorly designed systems” that “may contribute to systemic crises if risks are not adequately contained, with the result that financial shocks are passed from one participan­t to another.”

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