February 21, 2024

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Philippine Central Bank Advances Financial Inclusivity

The Bangko Sentral ng Pilipinas (BSP) has achieved a pivotal moment in central banking by welcoming a Non-Bank Financial Institution (NBFI) and Electronic Money Issuer (EMI) into the fold of institutions settling high-value transactions through the BSP-owned PhilPaSS Plus.

This marks a significant leap towards a more inclusive national payment system, where non-bank entities can seamlessly conduct efficient and low-risk funds transfers without the need for an existing RTGS participant to sponsor them into the settlement.

Assistant Governor Mary Anne P Lim, who spearheads the BSP’s Peso RTGS Management Committee, emphasised the importance of this move, citing the National Payment Systems Act as the enabling force. This legislation empowers the BSP to discern which institutions are eligible to partake in payment systems owned and operated by the central bank and those that can establish accounts with the BSP for settlement purposes.

Direct access to the PhilPaSS Plus signifies a shift towards more diverse participation in the Peso RTGS payment system, aligning with global trends. It grants non-bank entities the advantage of leveraging the efficiency and security of handling funds directly with the central bank, bypassing the need for intermediaries.

Assistant Governor Mary underlined the BSP’s commitment to safeguarding the entire Peso RTGS payment system, emphasising the importance of implementing rules to manage the inherent risks associated with this broader participation.

Currently, 236 institutions are utilising PhilPaSS Plus for settling both large-value transactions and retail payment clearing. This diverse array of participants includes universal and commercial banks, thrift banks, rural banks, digital banks, Nonbank Quasi-Banks (NBQBs), Clearing Switch Operators (CSOs), Financial Market Infrastructures (FMIs), and now, non-bank EMI participants.

The BSP’s move positions it among the trailblazing central banks that are spearheading the broader direct access of non-bank entities to central bank settlement services. Recognising the evolving landscape of payment systems amid the emergence of new players and innovative financial technologies, international standard-setting bodies are actively developing guidelines to manage associated risks effectively.

In addition, the BSP solidified its longstanding partnership with the Bankers Institute of the Philippines (BAIPHIL) through the signing of a memorandum of understanding (MoU). This collaboration encompasses joint initiatives such as capacity-building sessions for bank employees, officers, and directors.

It also involves the sharing of subject matter experts and non-confidential research materials. The scope of cooperation extends to advocacies like digital finance, financial literacy, financial inclusion, sustainable finance, legislative initiatives, and reforms.

Likewise, the BSP and BAIPHIL pledged to conduct joint research, studies, and publications on banking, monetary, and economic issues. The partnership aims to foster the exchange of information on learning and training opportunities, along with regular consultations and meetings to shape the design and execution of seminars, conferences, training and capacity building, research, and joint advocacies.

The BSP’s move to onboard non-bank electronic money issuers onto PhilPaSS Plus and its strengthened collaboration with BAIPHIL signal a strategic push towards financial inclusivity, technological innovation, and collaborative development within the Philippine financial landscape.

By expanding access to financial services, inclusivity promotes widespread economic growth and poverty reduction. Technological innovation enhances efficiency and convenience, transforming traditional financial processes and bolstering the resilience of the financial ecosystem.

Collaborative development ensures a cohesive and adaptive environment through shared knowledge, initiatives, and regulatory frameworks among stakeholders. This holistic approach fosters a dynamic, inclusive, and sustainable financial landscape, benefiting individuals and businesses across diverse segments of society.

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