PAYMENTS

AND

GROUP 3
 Reporters:
Buison, Jennyvee Nobles, Mary Mae Amihan, Jefferson

Delgado, Jodane Salhay, Precious Montejo, Crystyll

Diaz, Charmel Silva, Carlyn Claire Salem, James Dave

Laguna, Genrey Tesoro, Maria Tono, Daisy

Mijares, Carmela Villanueva, Aime

 TABLE OF CONTENTS

01 03 -PUBLICATIONS AND
-ROLES OF THE BSP REPORTS

-REALTIME GROSS
SETTLEMENT SYSTEM

02 -NPSA 04
-NATIONAL RETAIL
-PRINCIPLES FOR
FINANCIAL MARKET PAYMENT SYSTEM
INFRASTRUCTURES
-2022 Payments and Settlements
❑ Payment systems are essential to the effective
functioning of financial systems worldwide. It is this key
role played by payment and settlement system (PSS) in
the smooth functioning of an economy in general and its
financial and monetary system in particular that gives the
central bank (CB) a strong incentive for ensuring that an
effective, reliable and secure payment and settlement
system is in place.

In the Philippines, the BSP takes the lead in promoting an

efficient payments and settlements system by
providing:
a. the necessary infrastructure through the operations of
the Philippine Payment and Settlement System or the
“PhilPaSS”; and
b. a policy and regulatory framework, also known as the
National Retail Payment System or NRPS, to establish a
safe, efficient and reliable retail payment system in the
country.
-2022

ROLES OF THE
​Roles of the BSP​​ ​The BSP performs the
following role in the payments and settlements
system:
1. Operator of the real time gross settlement system
known as PhilPaSS

-The BSP, through its Payments and Settlements Office (PSO),

serves as the payment system operator responsible for the
operation and maintenance of PhilPaSS and its critical
components. It ensures that the operation of PhilPaSS is
continuous, safe and efficient so that time-critical payments
are completed as expected to facilitate and enhance
economic processes, manage risks, and absorb shocks in
order to promote financial stability.
2. Provider of credit facilities to banks as a lender of last
resort
-As payment systems affect the daily demand for
liquidity of banks/financial institutions and may
therefore affect the level of money market interest
rates, the BSP, as a lender of last resort, provides the
following liquidity tools to PhilPaSS participants:

​* Intraday Liquidity Facility (ILF) – a fully collateralized

facility established to maintain the smooth and efficient
operation of the payments system in order to avoid
interbank payments gridlock in the settlement process
within PhilPaSS business hours.
• Overdraft Credit Line (OCL) – another collateralized facility
which aims to assist bank experiencing unexpected or
higher than usual volume of inward check transactions. The
governing policies and procedures are provided under BSP
Circular 681 in order to provide additional liquidity for banks
encountering liquidity problems due to check clearing losses
as well as protect the BSP against settlement exposures.

3. Overseer of the payments and settlements system

The BSP, through the Payment Systems Oversight
Department of the Supervision and Examination Sector,
oversees the payment systems in the country to ensure
safeguards are in place to mitigate systemic risks arising
from settlement, credit and liquidity risks of payments and
settlement systems participants.
4. User of its own RTGS system
The BSP, through its different departments, also make
use of the payments and settlements system for the
settlement of its own transactions with its stakeholders, such
as:

* The automated collection and settlement of Supervision and

Examination Sector annual supervisory fees;
* Online processing of eRediscounting loan proceeds and
collection of banks’ maturing loans with Department of Loans
and Credit;
* Processing/posting of banks’ cash deposit and withdrawal
transactions with Cash Department;
* Investment/maturities of funds placed by the Provident Fund
Office; and
* Trading transactions as well as payments of maturing
RRP/SDA placements with Treasury Department
5. Initiate changes/reforms for the payments
system
The BSP initiates the conduct of
studies/research relating to payments system
to ensure that it grows and matures in
accordance with the global standards. Among
the studies conducted which initiated reform to
the retail payment systems in the country is the
National Retail Payment System.
 -2022

NPSA
 Republic Act No. 11127, or the National Payment
Systems Act (NPSA), provides a comprehensive legal and
regulatory framework which supports the twin objectives
of maintaining a payment system that is necessary to
control systemic risk and providing an environment
conducive to the sustainable growth of the economy.

A payment system provides the channels through

which funds are transferred among banks and other
institutions to discharge payment obligations arising from
economic and financial transactions across the entire
economy.
 An efficient, secure and reliable payment system
reduces the cost of exchanging goods and services. It is
an essential tool for the effective implementation of
monetary policy, and the smooth functioning of money
and capital markets.

The NPSA mandates the BSP to oversee payment

systems in the Philippines and exercise supervisory and
regulatory powers for the purpose of ensuring the
stability and effectiveness of the monetary and
financial system.
Payment System Oversight Framework (Circular No. 1089)

I​ n line with the provisions of the National Payment Systems

Act (RA 11127), the Monetary Board approved on 25 June 2020 the
Payment System Oversight Framework (PSOF) which sets out the
regulatory approach of the Bangko Sentral in overseeing payment
systems in the country. The framework also addresses the need
for comprehensive regulation over payment systems and other
financial market infrastructures through cooperative oversight.

The framework follows a risk-based oversight approach

mainly through the designation of payment systems. Designation
is based on the relative importance of payment systems as
systemically or prominently important. A designated payment
system (DPS) shall be subject to periodic assessment and closer
monitoring by the Bangko Sentral.
This assessment shall focus on the observance of standards such
as the Principles for Financial Market Infrastructures (PFMI), and
on compliance with relevant laws and regulations. In the event
that the operator of a DPS fails to satisfy regulatory expectations,
resulting in a threat to the safety, efficiency, and reliability of the
system, the PSOF provides for the appointment by the Bangko
Sentral of a manager to administer the operation of the operator
of a DPS.

With the adoption of the PSOF, the Bangko Sentral continues

to promote a safe and efficient national payment system, which is
crucial to the smooth functioning of financial markets and the
stability of monetary and financial systems.
-2022

PRINCIPLES
FOR
 The Principles for Financial Market Infrastructures (PFMIs)
were established as a result of the joint efforts of the Bank for
International Settlements (BIS) - Technical Staff of the Committee
on Payment and Settlement System (CPSS) and the International
Organization of Securities Commissions (IOSCO) to strengthen
core financial infrastructures and markets.

The principles in three (3) sets of standards:

1) 10 Core Principles for Systemically Important Payment Systems
2) 19 Recommendations for Securities Settlement (RSSS)
3) 15 Recommendations for Central Counterparties (RCCP)

The standards were harmonized to come up with a single

set of standards that will cover all relevant financial market
infrastructures: payment systems, central securities
depositories, central counter-parties and trade repositories.
Principle 1: Legal basis

An FMI should have a well-founded, clear, transparent, and

enforceable legal basis for each material aspect of its activities in all
relevant jurisdictions.

Principle 2: Governance

An FMI should have governance arrangements that are clear and

transparent, promote the safety and efficiency of the FMI, and support
the stability of the broader financial system, other relevant public
interest considerations, and the objectives of relevant stakeholders.

Principle 3: Framework for the comprehensive management of risks

An FMI should have a sound risk-management framework for

comprehensively managing legal, credit, liquidity, operational, and other
risks.
Principle 4: Credit risk

An FMI should effectively measure, monitor, and manage its credit

exposures to participants and those arising from its payment, clearing,
and settlement processes. An FMI should maintain sufficient financial
resources to cover its credit exposure to each participant fully with a high
degree of confidence. In addition, a CCP that is involved in activities with
a more-complex risk profile or that is systemically important in multiple
jurisdictions should maintain additional financial resources sufficient to
cover a wide range of potential stress scenarios that should include, but
not be limited to, the default of the two participants and their affiliates
that would potentially cause the largest aggregate credit exposure to the
CCP in extreme but plausible market conditions. All other CCPs should
maintain additional financial resources sufficient to cover a wide range of
potential stress scenarios that should include, but not be limited to, the
default of the participant and its affiliates that would potentially cause
the largest aggregate credit exposure to the CCP in extreme but
plausible market conditions.
Principle 5: Collateral

An FMI that requires collateral to manage its or its participants’ credit

exposure should accept collateral with low credit, liquidity, and market risks. An
FMI should also set and enforce appropriately conservative haircuts and
concentration limits.

Principle 6: Margin

A CCP should cover its credit exposures to its participants for all products
through an effective margin system that is risk-based and regularly reviewed.

Principle 7: Liquidity risk

An FMI should effectively measure, monitor, and manage its liquidity risk. An
FMI should maintain sufficient liquid resources in all relevant currencies to effect
same-day and, where appropriate, intraday and multiday settlement of payment
obligations with a high degree of confidence under a wide range of potential stress
scenarios that should include, but not be limited to, the default of the participant
and its affiliates that would generate the largest aggregate liquidity obligation for
the FMI in extreme but plausible market conditions.
Principle 8: Settlement finality

An FMI should provide clear and certain final settlement, at a

minimum by the end of the value date. Where necessary or
preferable, an FMI should provide final settlement intraday or in real
time.

Principle 9: Money settlements

An FMI should conduct its money settlements in central bank

money where practical and available. If central bank money is not
used, an FMI should minimize and strictly control the credit and
liquidity risk arising from the use of commercial bank money.

Principle 10: Physical deliveries

An FMI should clearly state its obligations with respect to the

delivery of physical instruments or commodities and should identify,
monitor, and manage the risks associated with such physical
deliveries.
Principle 11: Central securities depositories

A CSD should have appropriate rules and procedures to help ensure the
integrity of securities issues and minimize and manage the risks associated with the
safekeeping and transfer of securities. A CSD should maintain securities in an
immobilized or dematerialized form for their transfer by book entry.

Principle 12: Exchange-of-value settlement systems

If an FMI settles transactions that involve the settlement of two linked

obligations (for example, securities or foreign exchange transactions), it should
eliminate principal risk by conditioning the final settlement of one obligation upon the
final settlement of the other.

Principle 13: Participant-default rules and procedures

An FMI should have effective and clearly defined rules and procedures to
manage a participant default. These rules and procedures should be designed to
ensure that the FMI can take timely action to contain losses and liquidity pressures
and continue to meet its obligations.
Principle 14: Segregation and portability

A CCP should have rules and procedures that enable the segregation and
portability of positions of a participant’s customers and the collateral provided to
the CCP with respect to those positions.

Principle 15: General business risk

An FMI should identify, monitor, and manage its general business risk and
hold sufficient liquid net assets funded by equity to cover potential general
business losses so that it can continue operations and services as a going concern if
those losses materialize. Further, liquid net assets should at all times be sufficient
to ensure a recovery or orderly wind-down of critical operations and services.

Principle 16: Custody and investment risks

An FMI should safeguard its own and its participants’ assets and minimize the
risk of loss on and delay in access to these assets. An FMI’s investments should be
in instruments with minimal credit, market, and liquidity risks.
Principle 17: Operational risk

Internal and external sources of operational risk should be

identified by the FMI, and their impact should be mitigated using
appropriate systems, policies, procedures, and controls. Systems should
be built with a high level of security and operational reliability in mind, as
well as sufficient, scalable capacity. In the event of a large-scale or major
disruption, business continuity management should aim for a timely
recovery of operations and fulfillment of the FMI's obligations.

Principle 18: Access and participation requirements

An FMI should have objective, risk-based, and publicly disclosed

criteria for participation, which permit fair and open access.

Principle 19: Tiered participation arrangements

An FMI should identify, monitor, and manage the material risks to

the FMI arising from tiered participation arrangements.
Principle 20: FMI links

An FMI that establishes a link with one or more FMIs should

identify, monitor, and manage link related risks.

Principle 21: Efficiency and effectiveness

An FMI should be efficient and effective in meeting the

requirements of its participants and the markets it serves.

Principle 22: Communication procedures and standards

An FMI should use, or at a minimum accommodate, relevant

internationally accepted communication procedures and
standards in order to facilitate efficient payment, clearing,
settlement, and recording.
Principle 23: Disclosure of rules, key procedures, and market data

An FMI should have clear and comprehensive rules and

procedures and should provide sufficient information to enable
participants to have an accurate understanding of the risks, fees,
and other material costs they incur by participating in the FMI. All
relevant rules and key procedures should be publicly disclosed.

Principle 24: Disclosure of market data by trade repositories

A TR should provide timely and accurate data to relevant

authorities and the public in line with their respective needs.
-2022

PUBLICATIONS AND
➢ Under the NRPS, BSP mandated the formation of an
industry-led PAYMENT SYSTEM MANAGEMENT BODY
(PSMB) with the creation of (PPMI) to separate the
governance from clearing operations. The Philippine
Payments Management, Inc. (PPMI) formulate, issue, and
enforce the National Retail Payment System (NRPS)
governance framework, in close coordination with the
BSP.
➢ An Automated Clearing Hous (ACH) is a multilateral
legally binding agreement that manage the clearing and
participation rules for a particular payment stream.
➢ PPMI oversees the creation of automated clearing houses
(ACHs) between its members, while the CSOs execute the
clearing and settlement rules of the ACHs. The settlement is
done via the country’s real-time gross settlement system –
the Philippine Payments and Settlements System (PhilPaSS).

➢ Two new automated clearing houses (ACHs) were launched.

PESONet, under the NRPS, was launched in 2017 and
InstaPay, was launched in 2018. Payment service providers
(PSPs) are mandated to participate in these ACHs.
-2022

REALTIME GROSS
​I. What is PhilPaSS?

PhilPaSS is the acronym for Philippine Payment and

Settlement System, a real time gross settlement (RTGS) system
owned and operated by the Bangko Sentral ng Pilipinas (BSP)
that processes and settles interbank high value payment
transactions of banks through the demand deposit accounts of
the bank maintained with the BSP.

RTGS is a fund transfer system where transfer of money or

securities takes place from one bank to another on a real-time
and on gross basis. Settlement in real time means that payment
transaction does not require any waiting period. The
transactions are settled as soon as they are
received/entered/processed into the system. Gross settlement
means the transaction is settled on one to one basis without
netting with any other transaction. Once processed, payments
are final and irrevocable.
 III. How do PhilPaSS participants communicate with PhilPaSS?

The communication link by the participants to the BSP’s CAS

for the transmission of their payment instructions are either
through the following linkages:

A. SWIFT - stands for Society for Worldwide Interbank Financial

Telecommunication. It is a secure, dedicated, global
communication network that supports a range of financial
messaging services including FIN, its core store-and-forward
message processing service. The service provides financial
institutions with a wide range of message types for fast, secure
transaction and information processing and settlement. SWIFT
enables the participants to transmit their financial transactions
to their counterparties electronically. PhilPaSS participants are
required to enroll to SWIFT FIN Copy Service to allow them to
transmit directly their payment transactions to BSP’s LCSS/CAS
for processing and settlement.
B. PhilPaSS Participant Browser (PPB) - is a web-based facility which enables
PhilPaSS participant-banks to efficiently manage their respective DDAs
maintained with the BSP by: (1) allowing the banks’ designated users to
check and verify the status and details of all incoming and outgoing
transactions; (2) allowing designated users to re-prioritize or cancel
queued payments; (3) allowing users to generate reports on-demand in
various file formats; and (4) enabling banks to transmit their financial
transactions to their counterparties through the BSP’s LCSS/CAS.

C. 3rd Party System Providers – is an in-house developed system that is used

to validate the accuracy, completeness and authenticity of the data
files/batched transactions sent by other systemically important payment
systems namely: Check Clearing System of PCHC, ATM Network System
of Bancnet, Registry of Scripless Securities System of Bureau of Treasury
and PDS Settlement Highway of the PDS Holdings Group, to PhilPaSS for
processing and settlement.

D. Other BSP Internal System that interface with CAS such as cFAS,
eRediscounting System, Treasury Accounting System, Electronic Cash
Withdrawal System, Foreign Loan Application Registration System, etc.
-2022

NATIONAL RETAIL
- It is a policy and regulatory framework that aims to
provide policy direction in carrying out retail payment
activities through BSP supervised financial institutions
(BSFIs) by defining high-level policies, principles, and
standards, which when adopted, would lead to the
establishment of a safe, efficient and reliable retail
payment system.

- a key outcome of the NRPS is to increase adoption of

electronic retail payments from 1% electronic payments in
2013 to 20% electronic payments by 2020.
The Regulatory Framework

The NRPS provides the framework to secure promised

gains of modernizing retail payments for the benefit of the
consumers, the industry and the economy as a whole. This is
built on three core principles, namely:

1. Interoperability - is defined as a state in which customers can

transfer funds from their own account to any BSP-regulated
transaction account using any device.
2. Inclusivity - The inclusivity principle requires that all qualified
financial service providers must be able to effectively
participate in the system – regardless of their size and type of
transaction accounts offered.
3. “Coopetition” - is coined from the words “cooperation” and
“competition,” because NRPS promotes both cooperation and
competition in the industry.
Automated Clearing Houses (ACHs) and Clearing Switch Operators
(CSOs)

An Automated Clearing House or ACH is a multilateral legally

binding agreement that lays down the clearing and participation
rules for a particular payment stream to facilitate electronic fund
transfers among its participants. Payment streams that are
covered by a multilateral ACH promotes greater efficiency, better
risk management and interoperability compared to those that
are covered by separate bilateral agreements as most often
practiced.

Another principle under the NRPS framework is that each

ACH shall have only one clearing switch operator or CSO, whose
operations shall be limited to clearing and other services that do
not compete with services offered by PSMB members.
Nonetheless, this does not prevent a CSO from rendering
services to more than one (1) ACH or multiple ACHs.
Empowering Every Juan and Maria
- NRPS promotes, among others, interoperability—the state when end-
users or consumers are able to transfer funds from one account to
another account in any participating BSP supervised financial institution
(bank or electronic money issuer).
- NRPS likewise facilitates and supports the delivery of a wide range of
financial products that cater to the needs of all users, especially the
small-value, high frequency payers of the low-income segment.

Automated Clearing Houses (ACHs) under the NRPS

• PESONet

The Philippine EFT System and Operations Network (PESONet), the first
ACH under the NRPS, was launched on 08 November 2017.
It is a batch electronic fund transfer (EFT) credit payment scheme, which
can be considered an electronic alternative to the paper-based check
system
The Philippine Clearing House Corporation (PCHC) is the designated
clearing switch operator for PESONet for a two-year transitory period
beginning from the time of PESONet’s launch.
• InstaPay

It is a real-time low-value EFT credit push payment

scheme for transaction amounts up to P50,000.

This retail payment system, launched on 23 April 2018,

is designed to facilitate small value payments that will be
especially useful for the purchase of retail goods, paying
toll fees and tickets, as well as for e-commerce, which shall
enable, among others, Micro, Small and Medium
Enterprises (MSMEs).

BancNet is the designated clearing switch operator for

InstaPay for a two-year transitory period beginning from
the time of its launch.
Fees on Electronic Payments

To enhance transparency and

competitiveness among banks and electronic
money issuers (EMIs) that provide electronic
payments to their customers, BSFIs are required
to submit to the BSP (in accordance with BSP
Circular 980) the details of all fees that will be
charged to their clients when performing
electronic payments.
THANK YOU