Robust payment infrastructure to promote financial stability, says BSP

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MANILA, Philippines – The local financial system was expected to be more stable as regulators and actors adopt a set of rules governing the country’s critical payment infrastructure, the head of the central bank said Thursday (Nov.11).

In an online briefing, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said that the Financial Market Infrastructure Principles (PMFI), which will be applied to designated payment systems, will also improve efficiency and result in multiple payment options for end users.

“Adherence to the global standards set by the PFMI supports financial stability by improving the transparency, risk management and resilience of payment systems,” he said. “This fosters consumer welfare and protection of the public interest, especially amid the growing use of digital payments by Filipinos.”

The BSP mandates adherence to these principles by payment systems classified by the regulator as “systemically important” or “relevant”.

The former poses or has the potential to pose systemic risks that could threaten the instability of domestic payments. The second may not trigger or transmit systemic risk, but it could have a major impact or undermine public confidence in the payment system or in the circulation of money.

Primary payment systems are usually associated with widely used retail transaction methods.

For non-designated payment systems, the BSP can apply key considerations based on relevant principles to evaluate practices, design and operations.

Developed by the Bank for International Settlement and the International Organization of Securities Commissions, the PFMI is composed of 24 principles applicable to financial market infrastructures such as payment systems, central securities depositories, securities settlement systems, central counterparties and trade repositories.

Eighteen principles apply to systemically important payment systems. For those of notable importance, only 14 principles apply as retail payment systems are believed to have lower financial risk due to their low value transactions.

Central bank rules also set expectations for critical service providers of the designated payment system, in order to ensure that a service provider’s operations are kept to the same standards as those of the payment system operator.

The Peso Real-time Gross Settlement payment system managed by the BSP through PhilPaSSplus was approved by the Monetary Council as Systemically Important in July 2021. The BSP ensures that this payment system adheres to strict principles.

TSB

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