BSP and PPMI Sign MOA to Strengthen Governance in the Retail Payment System

The year 2018 ushers in a milestone for reforms in the retail payment system as the Bangko Sentral ng Pilipinas (BSP), represented by Governor Nestor A. Espenilla Jr., and the Philippine Payments Management Inc. (PPMI), represented by Chairman Justo A. Ortiz, signed the Memorandum of Agreement (MOA) between the BSP and PPMI on 12 January 2018.

Under the MOA, the BSP recognizes PPMI as the payment system management body (PSMB) while the PPMI recognizes the authority of the BSP as the primary overseer of the retail payment system given its critical role in the financial infrastructure as envisioned under the National Retail Payment System (NRPS) Framework.

The PSMB is a critical component of the NRPS Framework which has the objective of establishing a safe, efficient and reliable retail payment system in the Philippines. The creation of an industry-led self-governing body such as the PSMB is an implementation of the key NRPS principle espousing the separation of the governance of the retail payment system from the actual clearing operations. On 08 November 2017, the BSP issued Circular No. 980 on the Adoption of the NRPS Framework which applies to all BSP supervised financial institutions.

With the MOA, the BSP will provide continuing guidance to PPMI for alignment of its policies, standards and rules with the NRPS Framework and the PPMI undertakes to ensure proper implementation of the NRPS principles through its policies, strategies and rules. The BSP and PPMI agreed to have a shared responsibility in monitoring new or emerging trends in the retail payment industry and to notify each other of any relevant information that would warrant appropriate action from either party. They will also engage each other in consultation concerning policy formulation especially where it impacts the policy and regulatory framework governing BSFIs with respect to their payment system arrangements as well as on common concerns to prevent conflict with any BSP or PPMI action.

The MOA likewise reiterated that PPMI members shall undertake direct clearing activities within the PPMI governance structure through multilateral agreements among qualified direct clearing participants covering a specific payment stream. Furthermore, PPMI shall monitor and require its members to settle clearing results of automated clearing houses (ACHs) as defined in the NRPS Framework under the PPMI governance structure on a per ACH basis through the BSP’s real time gross settlement system (RTGS). The MOA also includes provisions on settlement arrangements and notification of such to the BSP as a risk management tool.

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