BSP RAISES BAR FOR PAYMENT SYSTEM OPERATORS
Operators of so-called “designated payment systems” used for digital fund transfers and settlement of electronic transactions will be held to a higher regulatory standard than other financial institutions, given their importance to the proper functioning of the Philippine economy.
Thus said the Bangko Sentral ng Pilipinas (BSP), which recently released more stringent guidelines governing these payment systems, including prohibiting positions with conflict of interest among key officers.
“Consistent with the BSP’s proportional and risk-based approach to payment system oversight, more stringent requirements shall apply to opBritish erators of designated payment systems in view of the potential of designated payment systems to pose systemic risks to the financial system,” the central bank said.
“Moreover, a failure in such designated payment systems could undermine public confidence in the national payment system,” it warned.
Global best practices
According to the regulator, the new rules are part of the phased-in implementation of Republic Act No. 11127 or the National Payment Systems Act.
The issuance further supports the adoption of the governance standards under the Principles for Financial Market Infrastructures, the internationally recognized standards jointly issued by the Bank for International Settleand ments and the International Organization for Securities Commissions. These international standards are applicable to financial market infrastructures, which include payment systems.
Governance framework
The governance policy provides the regulatory expectations on the governance arrangements and standards to be adhered to by all payment system operators. It also provides the criteria for qualification and grounds for disqualification of individuals elected or appointed as directors or officers of such firms.
In particular, the rules prohibit concurrent directorships among a clearing switch operator, its critical service provider and the payment system management body that governs the automated clearing house for which it renders services.
The guidelines also set governance standards that prescribe the quality of stewardship among payment system operators 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.
Taking into consideration adjustments needed in the governance arrangements of payment systems, the new rules provide a period of six months for the concerned firms to comply with general provisions of the issuance, except for provisions on temporary disqualification of directors or officers which would take effect immediately, the central bank said.