Senate gives nod to regulation of payment systems in PH

The Senate approved on third and final reading a bill allowing the Bangko Sentral ng Pilipinas (BSP) to regulate all payment systems in the country in a bid to increase efficiency and lessen risks in the Philippines' financial system.

Senate Bill No. 178 was sponsored by Senator Francis Escudero, chair of the Senate Committee on Banks, Financial Institutions and Currencies, and was authored by Senator Paolo Benigno Aquino IV. The bill was approved with 20 affirmative votes, zero negative vote and no abstention.

Escudero said the bill would arm the BSP with the tools to "promote safe, secure, efficient and reliable operation of payment systems in order to control systemic risks and provide an environment conducive to the sustainable growth of the economy."

"It is necessary to ensure the soundness and efficiency of payment systems--so that the costs of settlement do not interfere with the effective clearing of markets, and so that the systems have the ability to be robust against risks," he said.

Escudero said that the bill would achieve its goal by primarily "linking financial institutions together for the purpose of transferring monetary claims and settling payment obligations efficiently."

Under the bill, the BSP would have the power to designate any payment system as "posing or has the potential to pose a systemic risk," when such designation is necessary to protect the public interest.

The bill defined payment systems as "the set of payment instruments, whether tangible or intangible that enables a person to transfer funds."

"The payment system can be likened to a bedrock upon which monetary stability and financial stability rest," Escudero said.

This meant that payment systems could "become channels through which financial risks can be transmitted across financial institutions and markets," he added.

Escudero explained that the BSP, given its mandate and functions, must "take a proactive role in the development of a payment system and in ensuring that these systems operate in a safe and efficient manner."

"Central banks are keen in monitoring developments in the payment system to assess their impact on the demand for money, the influence of monetary policy transactions, and the efficiency and stability of critically related financial markets," he said.

Escudero said that the central banks of countries like Singapore, Australia, Indonesia, Cambodia and Myanmar have the mandate to oversee and regulate payment systems either in their respective mandates or in special laws. (JDC)