Governance standards for payment system operators set

BW FILE PHOTO

THE CENTRAL BANK has set governance standards for operators of payment systems (OPS), including qualifications for officials and possible grounds for termination.

Circular 1127 signed by Sept. 17 also imposed stricter rules for OPS that engage in other businesses regulated by the Bangko Sentral ng Pilipinas (BSP).

“The guidelines set governance standards that prescribe the quality of stewardship among OPS given that these entities have critical roles in ensuring the smooth circulation of funds in the economy in a safe, efficient, affordable and convenient manner,” the central bank said in a statement.

The circular is applicable to the BSP as the operator of the real time gross settlement system of PhilPaSS Plus. It likewise covers BSP-supervised financial institutions, including banks, nonbank financial institutions, nonbank electronic-money issuers, cooperatives, and other businesses that are considered OPS under central bank regulations.

All OPS are required to comply with a risk appetite statement which details the types of risks they are willing to accept and avoid in order to keep their business objectives. This should include statements that report measures on systemic, financial, and operation risks that could build up through the course of their business.

A risk government framework that lays out the business strategy that will be adopted by a firm’s board of directors will also be required.

The circular requires an OPS to have a board of directors composed of 5-15 members. One of them or at least 20% of the board should be independent directors.

Foreigners can be part of the board of directors of an OPS except for cooperatives, to the extent provided by existing laws and regulation.

An OPS is also expected to have an audit, risk oversight, and corporate governance committees that will oversee their operational and financial reporting processes and look into concerns of malpractice and resulting investigations, if needed.

Under the circular, directors and officers could be subject to either permanent or temporary disqualification. Persons will be permanently disqualified from assuming officership in an OPS if they were convicted by final judgment for violating the payment systems law, and those found to be blamed behind the closure of an OPS based on findings by the Monetary Board.

Meanwhile, grounds for temporary disqualification include unwillingness to pay financial obligations, being involved in a previous OPS closure whose case is still pending before the Monetary Board, failure to discharge duties that in turn threaten the reliability of a payment system, as well as those already engaged in businesses similar to the OPS.

Persons that were involved in violations that could result in dismissal or termination under the Labor Code of the Philippines and those with pending cases related to financial crimes could also be subject to temporary disqualification.

OPS are given six months to comply with the circular, except for the provisions on temporary disqualification of directors and officers of OPS, which shall take effect immediately.

The issuance will complement the adoption of international standards under the Principles for Financial Market Infrastructures, the BSP said.

The circular is also in line with the phased-in implementation of Republic Act 11127 or the National Payment Systems Act which was enacted in 2018.

There are 160 BSP-registered OPS as of Sept. 10. — Luz Wendy T. Noble

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