BSP proposes rules to ensure settlement of payments, transfers during disruptions

THE BANGKO SENTRAL ng Pilipinas (BSP) has released draft rules that require participants of the Peso Real-Time Gross Settlement (RTGS) payment system to adopt alternative mechanisms to ensure transactions can go through even during disruptions.

A draft memorandum that seeks to amend the Manual of Regulations for Payment Systems showed proposed changes to Peso RTGS Payment System rules on incident management.

The proposed rules said Peso RTGS Payment System participants must investigate and report to the BSP problems related to system access, report generation, transaction monitoring, receipt of settlement notifications, and other similar occurrences, with cyberattacks or similar disruptive incidents required to be reported immediately and others within two hours of occurrence if they remain unresolved.

Participants are also required to adopt alternative settlement mechanisms to ensure the continued settlement of payments, funds transfers, and other financial obligations during disruptions.

One alternative option for banks and other financial institutions is to apply bilateral netting arrangements with counterparties. This refers to the offsetting of obligations between two parties to reduce the number and value of payments or deliveries needed to settle a set of transactions.

They may also designate a paying agent, or a direct participant that makes payments on behalf of another direct participant, to execute their transactions in PhilPaSS Plus.

“Participants must have pre-established formal agreements with their identified counterparties in the event that they enter into bilateral netting or paying agent arrangements,” the central bank said.

Lastly, they may invoke the Business Continuity Plan (BCP) for participants with settlement accounts prescribed by the BSP. The BCP contains procedures for when PhilPaSS Plus is operational but a participant is unable to connect and/or send payment messages, and for when PhilPaSS Plus is not operational.

“This BCP addresses scenarios involving connectivity or system availability issues affecting the participants’ access to the Peso large value settlement facility,” the BSP said.

Meanwhile, for their part, the alternative settlement options for financial market infrastructures and clearing switch operators are to apply multilateral netting arrangements with their participants — which is the offsetting of obligations between or among multiple participants to result in a single net position per participant — and to invoke their respective joint BCPs with the BSP under existing regulations, which include contingency measures on backup facilities, recovery sites, connectivity backups, and alternative operating procedures.

The central bank will accept feedback for the draft memo until Dec. 12. — KKC