Updated as of

September 2024
 FOREWORD

As the Bangko Sentral takes strategic strides toward payment system reforms in
alignment with international standards and best practices, it has become imperative
that the regulatory issuances on payments are readily available to guide these
reforms. This Manual of Regulations for Payment Systems (MORPS) is therefore
designed to systematically organize the various policy and regulatory issuances
enforced by the Bangko Sentral. These issuances implement the broader provisions of
Republic Act No. 11127 or the National Payment Systems Act in conjunction with other
pertinent laws governing payment systems.

The MORPS is primarily designed to foster adherence by operators of payment

systems (OPS) to standards that are aimed at fortifying the safety, efficiency, and
reliability of the national payment system. Its significance, however, extends beyond
OPS as it serves as an invaluable reference for any individual, institution, or agency
with an active interest in the national payment landscape.
 PREFACE

The Manual of Regulations for Payment Systems (MORPS) compiles payment system
regulations approved by the Monetary Board of the Bangko Sentral.

This MORPS edition contains updates and amendments on payment system

regulations as of end September 2024. It also covers provisions related to the adoption
of international standards and best practices, as well as amendments to existing
policies.

MOR Oversight Committee

Adviser Deputy Governor, Payments and Currency Management
Sector (PCMS)
Chairperson Head, Payments and Currency Development Subsector
(PCDSs)

MORPS Technical Secretariat

Chairperson: Head, Payments Policy and Development Department
(PPDD)
Members: Officers and staff, Payments Policy Group
 LIST OF ACRONYMS AND ABBREVIATIONS

ACH Automated Clearing House

AM Assessment Methodology
AML/CTF Anti-Money Laundering/Combatting the Financing of Terrorism
AML/CTPF Anti-Money Laundering/Countering Terrorist and Proliferation
Financing
ASEAN Association of Southeast Asian Nations
BIS Bank for International Settlements
BSFI BSP Supervised Financial Institution
CDA Cooperative Development Authority
CEO Chief Executive Officer
CFO Chief Financial Officer
COE Confirmation of Eligibility
COO Chief Operating Officer
CPMI Committee on Payments and Market Infrastructures
CSO Clearing Switch Operator
CSP Critical Service Provider
DDA Demand Deposit Account
DOS Directors, officers, stockholders
DOSRI Directors, officers, stockholders, or Related interests
DPS Designated Payment System
EFT Electronic Fund Transfer
EMEAP Executives’ Meeting of East Asia-Pacific Central Banks
EMI Electronic money issuers
EMI-NBFI Electronic Money Issuer-Non-Bank Financial Institution
EPFS Electronic Payment and Financial Services
E-Wallet Electronic Wallet
FMI Financial Market Infrastructure
IASP Internationally Accepted Standards and Practices
IOSCO International Organization of Securities Commissions
IT Information Technology
MORB Manual of Regulations of Banks
MORNBFI Manual of Regulations for Non-Bank Financial Institutions
MORPS Manual of Regulations for Payment System
NPS National Payment System
NBFI Non-bank financial institution
NPSA National Payment System Act
NRPS National Retail Payment System
ODPS Operator of a Designated Payment System
OGCLS Office of the General Counsel and Legal Services
OI Originating Institution
OPS Operator of a Payment System
OTC Over-the-counter
PCMS Payments and Currency Management Sector
PFMI Principles for Financial Market Infrastructures
Php Philippine Peso
PIPS Prominently Important Payment System
POI Point of Interaction
PSMB Payment System Management Body
PSOF Payment System Oversight Framework
PSP Payment Service Provider
QR Quick Response
R.A. Republic Act
RAS Risk Appetite Statement
RCB Rural/Cooperative Banks
RI Receiving Institution
RPT Related party transactions
RTGS Real-time Gross Settlement
SEACEN Southeast Asian Central Banks
SEC Securities and Exchange Commission
SIPS Systemically Important Payment System
TB Thrift Banks
U/KB Universal and Commercial Banks
 MANUAL OF REGULATIONS FOR PAYMENT SYSTEMS

TABLE OF CONTENTS

PART ONE - REGULATORY FRAMEWORK

Section 101 Payment System Oversight Framework

Section 102 Adoption of the Principles for Financial Market

Infrastructures

Section 103 Regulatory Reporting Standards for Operators of

Payment Systems (OPS)

PART TWO – RETAIL PAYMENT SYSTEM (RPS)

Section 201 National Retail Payment System Framework

PART THREE – RESERVED

PART FOUR – GOVERNANCE AND OVERSIGHT

Section 401 Governance Policy for Operators of Payment System

PART FIVE – LICENSING AND REGISTRATION

Section 501 Electronic Payment and Financial Services

Section 502 Rules and Regulations on the Registration of

Operators of Payment Systems

Section 503 OPS that Engage in Merchant Payment Acceptance

Activities

PART SIX – RESERVED

PART SEVEN – SETTLEMENT

Section 701 Settlement of Electronic Payments Under the

National Retail Payment System (NRPS) Framework

PART EIGHT – RESERVED

PART NINE – OPERATIONAL RISK

Section 903 Special Rules for Merchant Payment Acceptance

Activities
 PART TEN - ANTI-MONEY LAUNDERING / COUNTERING TERRORISM AND
PROLIFERATION FINANCING (AML/CTPF)

Section 1003 Special Rules for Merchant Payment Acceptance

Activities

PART ELEVEN - END-USER PROTECTION

Section 1103 Special Rules for Merchant Payment Acceptance

Activities

PART TWELVE – EFFICIENCY AND EFFECTIVENESS

Section 1201 Adoption of the National Quick Response (QR) Code

Standard

PART THIRTEEN - RESERVED

PART FOURTEEN – LARGE VALUE PAYMENT SYSTEM RULES

Section 1401 Peso Real Time Gross Settlement (RTGS) Rules

PART FIFTEEN – SANCTIONS AND ENFORCEMENT FRAMEWORK

Section 1501 Sanctions

 PART ONE
REGULATORY FRAMEWORK

101 PAYMENT SYSTEM OVERSIGHT FRAMEWORK

101.1 Policy Statement. A safe and efficient national payment system is crucial to the
smooth functioning of financial markets and the stability of monetary and financial
systems. It is also instrumental in achieving and sustaining inclusive economic growth.
Thus, the Bangko Sentral adopts this oversight framework for the effective and
efficient governance of the national payment system (NPS).

101.2 Objectives of the Oversight Function. The Bangko Sentral performs oversight
functions primarily to ensure safety, efficiency, and reliability of the NPS.

Safety builds and preserves confidence in the financial system. This objective requires
reliability and integrity of the payment system as well as effective management of a
broad spectrum of payment-related risks such as legal, compliance, credit, liquidity,
business, custody, investment and operational risks, including cybersecurity breaches,
operational and settlement failures, and fraudulent transactions.

Efficiency is characterized by the presence of quick and affordable payment means

which are fit for the purpose of the transactions and the needs of the users and the
participants. Interoperability and healthy competition among the Payment Service
Providers (PSPs) and the Operators of a Payment System (OPSs) are necessary to
achieve efficiency.

101.3 Responsibility for Oversight. Pursuant to the authority granted under Section 5
of R.A. No. 11127 or the NPSA and Section 3 of R.A. No. 7653 or The New Central Bank
Act as amended by R.A. No. 11211, the Bangko Sentral, through an appropriate
oversight department, is responsible for overseeing the NPS, including the payment
system that the Bangko Sentral owns and operates pursuant to Section 8 of R.A. No.
11127. The Bangko Sentral shall adopt internal safeguards to ensure independence
between its overseer and operator functions.

101.4 Cooperative Oversight. With regard to payment activities and interlinkages of

Financial Market Infrastructures (FMIs) that relate or interconnect with payment
systems, the Bangko Sentral shall pursue cooperative oversight with relevant local
regulators, government agencies, and foreign regulators. Apart from enhancing
oversight capacity and response, cooperative oversight prevents regulatory arbitrage
resulting from gaps, inefficiencies, duplications, and inconsistencies in the regulations
for FMIs. In this respect, the Bangko Sentral shall establish measures to facilitate
effective and efficient flow of information among various regulators and government
agencies. The cooperation and information-sharing process shall be compliant with
relevant statutory provisions and consistent with the responsibilities for authorities
under the Principles for Financial Market Infrastructures (PFMI).1

a. Other local regulators and government agencies. The Bangko Sentral shall
coordinate with other regulators including primary regulators of FMIs, that relate
to or interconnect with payment systems. The grant, suspension, or revocation of
any government license necessary for the conduct of business of an OPS must be

1
International standards for financial market infrastructures, i.e., payment systems, central securities depositories,
securities settlement systems, central counterparties and trade repositories, issued by the CPMI and the IOSCO.
1
 done only with prior consultation with the Bangko Sentral,2 being the primary
regulator of the OPS.

b. Foreign regulators or overseers of payment systems of other countries. The Bangko

Sentral’s cooperative oversight shall conform to the arrangements entered into by
the Philippines through regional and global affiliations such as, but not limited to,
the Executives’ Meeting of East Asia-Pacific Central Banks (EMEAP}, South East
Asian Central Banks (SEACEN), and Association of South East Asian Nations
(ASEAN). In cases where a payment system participant in the Philippines also
operates in other jurisdictions, or a domestic payment system interacts with FMIs
in other countries, the Bangko Sentral can directly coordinate with foreign
regulators or overseers of payment systems. The coordination aims to facilitate
safe, efficient, and reliable cross-border payment transactions.

101.5 Scope of Oversight. The oversight function of the Bangko Sentral shall cover the
NPS including activities of the following institutions:

a. Operators of payment systems (OPS). All OPS shall comply with the relevant
regulations and guidelines set out by the Bangko Sentral, including governance,
risk management and reporting requirements. An OPS shall remain financially and
technically capable to ensure that the payment system it operates remains robust
and responsive to the needs of its participants.

b. Financial Market Infrastructures (FMI). The Bangko Sentral focuses its oversight on
the NPS. Cooperative oversight shall be pursued by the Bangko Sentral for
payment activities and interlinkages of other FMIs that relate to or interconnect
with payment systems. Payment system FMIs, at the minimum, shall observe the
relevant PFMI and comply with applicable Bangko Sentral rules and regulations.
PFMI assessment responsibilities for other FMIs shall be subject of cooperative
oversight with the FMI’s primary regulator. Likewise, the oversight function shall
extend to the payment and settlement activities of correspondent banks and
custodians.3

c. Payment System Management Body (PSMB). A PSMB, duly accredited by the

Monetary Board, shall be responsible for promoting the development and
interoperability of the payment system, the creation of payment system rules and
agreements, and the establishment of standards to ensure that payment
transactions are safely and efficiently cleared and settled with finality; provided,
that the said rules, agreements, and standards shall be subject to review and prior
approval by the Bangko Sentral.

The PSMB shall develop a comprehensive and holistic governance framework that
satisfactorily demonstrates how the PSMB will perform self-regulation among its
members in accordance with the NPSA. The PSMB shall establish policies and
procedures to implement the governance framework, including assurance
measures for members’ compliance with the PSMB rules and regulations, to instill
discipline among its members and to promote development of the payment
system. The development and implementation of the framework, policies and
procedures by the PSMB shall be subject of oversight by the Bangko Sentral. The
Bangko Sentral may accredit several PSMBs. Conversely, the Bangko Sentral may
2
Section 9 of R.A. No. 11127
3
Custodians hold securities for their customers, including banks, and provide related services. BIS, “Central Bank
Oversight of Payment and Settlement Systems” (May 2005).
2
 revoke the accreditation of a PSMB for failure to perform its function or when it no
longer serves its purpose as a PSMB.

d. Payment service providers (PSPs). PSPs shall ensure that the payment instruments
and delivery channels they offer are responsive to the needs of the end-users and
compliant with relevant regulatory requirements, including, but not limited to,
payment regulations, consumer protection, information security, and anti-money
laundering/combating the financing of terrorism (AML/CFT).

e. Critical Service Provider (CSP) of a designated payment system. The Bangko Sentral
shall exercise its oversight function over the CSPs of DPS. The Bangko Sentral may
engage in a cooperative oversight with the primary regulator of a CSP that
operates not only in the Philippines but also in other jurisdictions. At the minimum,
CSPs shall observe the relevant principles for CSPs as provided in the PFMI.

101.6 Oversight Activities.4 Consistent with a risk-based approach that takes into
consideration both the payment system’s risk profile and its impact in the NPS, the
Bangko Sentral shall perform the following oversight activities:

a. Monitoring existing and planned payment systems. The Bangko Sentral monitors
existing and planned payment systems to obtain an in-depth knowledge of the
interaction among payment systems and the interlinkages between payment
systems and other FMIs. By monitoring payment systems, the Bangko Sentral aims
to ultimately determine the impact of these systems on the broader financial and
monetary systems. Relative to this activity, the Bangko Sentral adopts the
following policies:

(1) Registration and licensing. The Bangko Sentral requires registration of all OPS
in accordance with the guidelines provided under Section 502 of the MORPS.
A registered OPS that intends to operate within a designated payment system
shall secure prior approval from the Bangko Sentral.5 The licensing framework
under the MORPS shall include, at a minimum, the requirements for PSPs,
ODPS, and payment services, arrangements, instruments, and activities.

(2) Off-site monitoring. The Bangko Sentral shall require the participants of
payment systems to submit periodic and ad hoc reports on payment and other
financial transactions, key risk indicators, incidents, and other statistics, key
documents, and information relevant to its oversight of the NPS. The
submission of the required reports to the appropriate oversight department
shall conform to the reporting governance framework of the Bangko Sentral. As
deemed relevant, the Bangko Sentral shall conduct meetings with existing
and/or prospective participants of a payment system.

(3) On-site activities. The Bangko Sentral shall perform on-site activities which shall
complement off-site activities to strengthen the oversight of the NPS. The
appropriate oversight department shall determine the frequency and scope of
on-site activities. These activities shall include, but are not limited to, review of
contractual arrangements governing payment systems, evaluation of pricing

4
The Bangko Sentral‘s oversight activities are consistent with those provided in the “Central Bank Oversight of
Payment and Settlement Systems” issued by the CPMI.
5
Pursuant to R.A. 11127, operators of designated payment systems are required to secure prior authority from the
Bangko Sentral
3
 mechanisms against the principles adopted by the Bangko Sentral, verification
of compliance with relevant laws, regulations and policies, and validation of
representations made by the participants in the payment systems.

b. Assessing the NPS and payment systems against the safety, efficiency and
reliability objectives. In pursuit of these objectives, the Bangko Sentral conducts
continuous assessment of payment systems and the NPS based on information
gathered from its monitoring activities. The Bangko Sentral adopts the following
policies in connection with this activity:

(1) Internationally Accepted Standards and Practices (IASPs). IASPs are

established, thoroughly-developed, and generally-accepted guidance
prescribed by reputable international-standard setting bodies, which include
multilateral agencies.6 The Bangko Sentral shall require the observance of IASPs
in the design and operation of payment systems.

(2) Assessment Criteria. The Bangko Sentral shall adopt different sets of
assessment criteria in consideration of the characteristics and risk profile of
payment systems, the size and profile of the transactions these systems
process, and the system architecture, governance and controls, among others,
established by the participants in the payment systems.

(3) Designation. The Bangko Sentral shall designate a payment system which
poses or has the potential to pose systemic risk that could threaten the stability
of the NPS. To protect public interest, the Bangko Sentral may also designate a
payment system which may not trigger or transmit systemic risk but could have
a major economic impact or undermine the confidence of the public in the NPS
or in the currency in general. Designation shall conform to the criteria and the
process provided in this framework.

(4) Enforcement action. The Bangko Sentral may deploy enforcement actions,
including but not limited to monetary and/or administrative penalties and
sanctions, to ensure compliance with relevant laws and regulation and bring
about timely corrective actions. Any violation committed by an OPS or any
other participant in a payment system, and/or by their directors and officers,
shall be subject to the sanctions set forth in Sections 36 and 37 of R.A. No. 7653,
as amended, and Sections 19 and 20 of R.A. No. 11127, as appropriate.

c. Inducing Change. The Bangko Sentral acts as a catalyst for change to pursue
development and innovation of payment systems, enhance the safety and
efficiency of the NPS, as well as address emerging payment risks or issues. The
Bangko Sentral may pursue its reform agenda in several ways, such as, but not
limited to, the following means:

(1) Stakeholder dialogue. The Bangko Sentral may regularly conduct dialogues
and collaborate with key stakeholders on innovative approaches towards
improving the payment system to ensure that oversight expectations are
consistent with industry initiatives and the needs of the end users. Towards this
end, a formal forum, led by the Bangko Sentral with key stakeholders as regular
members, may be created. Further, the Bangko Sentral shall conduct focused
research and, as suitable, collaborate with other local and/or foreign regulators

6
Examples include: The World Bank (WB), and the BIS
4
 on payments development in the country. Joint actions or projects can be
pursued for this purpose.

(2) Policy issuance. The Bangko Sentral shall issue policies to enable innovative
solutions for the payment systems to thrive while keeping the existing and
emerging payment-related risks adequately managed and mitigated. These
policies shall include principles and requirements on various areas, such as, but
not limited to governance, risk management, consumer protection, data
confidentiality, information security, AML/CFT, and pricing mechanism.

101.7 Designation of a Payment System. A payment system shall be designated as

Systemically Important Payment System (SIPS) or Prominently Important Payment
System (PIPS) upon determination by the Bangko Sentral that the payment system
poses or has the potential to pose systemic risk, or the designation of the payment
system is necessary to protect public interest. The Bangko Sentral shall take into
account the following criteria and any other relevant considerations approved by the
Monetary Board for the purpose of designating payment systems:

a. Market share;
b. Aggregate settlement risk based on volume and value of transactions;
c. Nature and complexity of transactions that the system processes;
d. Interdependence with other payment systems or FMIs; and
e. Absence of alternative payment system.

101.8 Designation. Vetting on the designation of a payment system shall be based,

among others, on information gathered from offsite monitoring, stakeholder
dialogue, on-site activities, and cooperative oversight. Once the designation criteria
are met, the Bangko Sentral shall initiate a focused review on the payment system’s
profile, including its current and potential impact on the NPS. In the course of the
assessment, the Bangko Sentral shall engage the participants of the payment system
being evaluated for possible designation.

Upon approval of the designation of a payment system, the Bangko Sentral shall notify
the participants of the payment system. A transitory provision for compliance with the
requirements for a designated payment system shall be included in the notification,
as applicable. Moreover, the Bangko Sentral shall inform the public of the designation
of a payment system.

101.9 Designated Payment System (DPS). Participants of DPS shall be subject to

periodic assessment by the Bangko Sentral. The assessment shall be comprised of on-
site visits and off-site monitoring activities. Assessments shall focus on the observance
of standards such as the PFMI and other IASPs, compliance of participants in the DPS
with laws, regulations, and determination of whether the factors considered for
designation continue to exist. The participants in a DPS shall demonstrate adequate
governance and risk management arrangements consistent with the principles set
out in relevant laws and regulations. These arrangements cover several areas of
concern including the access of participants to the system, management of liquidity,
credit, operational, settlement and general business risks, finality of settlement, fair
market competition, reasonable pricing mechanism, independent assurance/audit,
and transparency.

5
101.10 Operator of a Designated Payment System (ODPS). Recognizing the role
assumed by an operator in the maintenance and operation of a designated payment
system, the Bangko Sentral, through the Monetary Board, shall set the organizational
and operational requirements for an ODPS.

At a minimum, an ODPS shall:

a. Secure a certificate of authority issued by the Monetary Board prior to (1)
registering the Articles of Incorporation and By-Laws, or any amendments thereto,
or (2) obtaining a license to do business in the Philippines for submission to the
Securities and Exchange Commission (SEC), as applicable;
b. Be a stock corporation, and licensed to do business in the Philippines in case of
foreign entities;
c. Be a registered OPS pursuant to Section 502 of the MORPS and must secure prior
authority to be an ODPS from the Bangko Sentral. If an existing payment system is
designated, the operator shall secure an authority to be an ODPS from the Bangko
Sentral;
d. Obtain prior approval of the Monetary Board for any change in ownership or
control, directly or indirectly, of more than ten percent (10%) of the voting stock of
the ODPS;7
e. Secure approval from the Bangko Sentral prior to implementation of a significant
modification in its business model;
f. Comply with the fit and proper rule set on qualifications and disqualifications of
individuals elected or appointed as directors or officers of the ODPS with respect
to their integrity/probity, physical/mental fitness, relevant experience, education,
training, competence and other qualifications necessary in the performance of
their duties. In this regard, the officers and directors of an ODPS may be confirmed,
disqualified, suspended, removed, or watch-listed by the Monetary Board, without
prejudice to imposition of other enforcement actions;
g. Comply with governance, risk management and internal control standards set by
the Bangko Sentral, including but not limited to the observance of relevant PFMI
principles, confidentiality of payment information, and compliance with R.A. No.
9160, otherwise known as the “Anti-Money Laundering Act of 2001” and other
related laws;
h. Comply with the outsourcing framework prescribed by the Bangko Sentral
including the scope and extent of the responsibility of the ODPS in regard to the
actions of its service provider(s), requirements on ensuring that governance, risk
management, and internal control standards are consistently applied to the
outsourcing arrangement and to the parties involved, or any limitation of functions
that may be outsourced. In this regard, the ODPS is expected to establish
accreditation and continuing compliance requirements on its service provider(s)
or participant OPS to maintain the integrity of the payment system;
i. Exhibit high degree of security and operational reliability; and
j. Adopt contingency requirements (e.g., operational, liquidity) to ensure timely
completion of processing commitments.

An ODPS is expected to engage with the appropriate oversight department of the

Bangko Sentral to discuss how it intends to observe relevant standards. The
requirements a, b, and d for ODPS as cited above shall not apply to payment systems
owned and operated by the Bangko Sentral.

7
Section 13 of R.A. No. 11127
6
101.11 Designation of a Manager to Manage the Operations of the ODPS. When a
threat to the safety, efficiency and reliability of a designated payment system exists,
the Bangko Sentral, upon determination of its appropriate payment system oversight
department, and with prior approval of the Monetary Board, shall appoint without
need for prior court hearing, a manager of recognized competence in payment
systems to manage the operations of the ODPS in accordance with Section 17 of R.A.
No. 11127. The Monetary Board shall not be precluded from replacing the manager
assigned if it is deemed necessary.

101.12 Revocation of Designation. The Bangko Sentral, through the Monetary Board,
may revoke the designation of a payment system upon determination that the
payment system no longer meets the designation criteria of a DPS provided in this
framework. The participants in the DPS and the public shall be informed of the
revocation of the designation.

101.13 Enforcement Action. Enforcement Action under Subsection 101.13 was

transferred to Part 15 of the Manual.

(Circular No. 1089 dated 07 July 2020)

102 ADOPTION OF THE PRINCIPLES FOR FINANCIAL MARKET

INFRASTRUCTURES (PFMI)8

102.1 Policy Statement. In line with the thrust of ensuring the safety, efficiency, and
reliability of the national payment system (NPS), the Bangko Sentral shall require the
adoption of the PFMI standard by the designated payment systems (DPS), pursuant
to the Payment System Oversight Framew1ork (PSOF), and the National Payment
Systems Act (NPSA). In cases involving non-payment system financial market
infrastructures (FMIs) and cross-border payment systems, adoption of the PFMI may
be subject of cooperative arrangements9 with other regulatory authorities.

102.2 Scope. The mandatory adoption of the PFMI standard shall be required for DPS,
including its participants10, to the extent of the role/s being performed by said
participants in the DPS. Aligned with this, the Bangko Sentral shall use the PFMI
assessment methodology to determine the observance of relevant principles by the
DPS as well as identify possible risks and induce changes in the NPS. For non-
designated payment systems, the Bangko Sentral may utilize applicable key
considerations under relevant principles of said Standard to assess the practices in the
design and operations of said payment systems. For cross-border payment system, in
case the requirements under Bangko Sentral regulations or PFMI are not applied by
the foreign overseer/authority in its home jurisdiction, said regulations or principles
may still be required by the Bangko Sentral as deemed necessary and consistent with
the authority granted to the Bangko Sentral over its registered and licensed

8
International standards for FMIs, i.e., payment systems, central securities depositories, securities settlement systems,
central counterparties and trade repositories, issued by the Committee on Payments and Market Infrastructures (CPMI)
and the International Organization of Securities Commissions (IOSCO)
9
Section 9 of the NPSA Coordination with Other Government Agencies and Foreign Regulators: and as provided in the
PSOF.
10
As defined under the NPSA. participants include operator. issuer, service provider or any person involved in the
payment system other than the end-user
7
institutions. The coordination with foreign regulators shall aim to facilitate safe,
efficient, and reliable cross­ border payment transactions.11

102.3 Relevant Principles. The PFMI is a set of international standards designed to

strengthen FMIs and make them more resilient to financial crises, and participant
defaults. In general, while the standards are principles-based, said standards
incorporate, in some cases, specific minimum requirements to achieve the same base
level of risk management across different FMIs and countries.12

While the PFMI consists of twenty-four (24) principles, the required adoption by the
DPS shall at a minimum extend to principles relevant to payment systems in the
country, as provided in Appendix 102-1. These principles shall be applied holistically
and not on a stand-alone basis given that some principles are built upon others while
some complement others. The principles are classified into eight (8) broad categories,
namely:
a. General organization - Principles under this category provide guidance on how the
DPS shall generally be organized to establish a strong foundation for the
comprehensive management of risks in the DPS. This covers principles on legal
basis, governance, and risk management framework.
b. Credit and liquidity risk management – Principles under this category provide
standards to support a high degree of confidence that the DPS will be able to
operate and serve as a source of financial stability even under stressful conditions.
c. Settlement – Principles under this category require the DPS to address issues on
settlement risk and finality of DPS transactions.
d. Default management – This principle requires the adoption of appropriate policies,
rules, and procedures in the DPS to manage default of participant/s.
e. General business risk and operational risk management – Principles under this
category are designed to: (1) protect participants and the financial system from the
risk that a DPS could suddenly cease operations as a result of business losses
unrelated to participant defaults; and (2) strengthen the requirements on
operational reliability and resilience.
f. Access – Principles under this category address management of risks posed by
alternative access arrangements and the need for fair and open access to the DPS.
g. Efficiency – Principles under this category enable the DPS to be efficient and
effective in meeting the requirements of its participants and the market it serves.
h. Transparency – Principles under this category require that relevant information
shall be provided to the participants of the DPS, the authorities, and the public to
enable informed and sound decision making as well as foster confidence in the
market it serves.

102.4 Adoption by DPS. The adoption of the applicable principles by the DPS shall
depend on whether it is designated as a systemically important payment system
(SIPS) or prominently important payment system (PIPS). Appendix 102-1 provides
which principles shall be adopted by a SIPS or PIPS.13

102.5 Critical Service Providers (CSPs). In certain cases, the operational reliability of a
DPS may be dependent on the performance of service providers that are critical to its
operations, such as information technology and messaging providers. In this respect,
the Bangko Sentral sets forth the following expectations14 to be met by CSPs:

11
As provided under cooperative oversight section of the PSOF.
12
PFMI. Bank for International Settlements (BIS) and IOSCO, 2012
13
The guidelines on the designation of a payment system are provided under the PSOF.
14
Adopted from Annex F of the PFMI, BIS and IOSCO, 2012
8
a. Risk identification and management – A CSP is expected to identify and manage
relevant operational and financial risks to its critical services and ensure that its risk
management processes are effective.
b. Information Security – A CSP is expected to implement and maintain appropriate
policies and procedures, and devote sufficient resources to ensure the
confidentiality and integrity of information and the availability of its critical
services in order to fulfill the terms of its relationship with the Operator of a
Designated Payment System (ODPS)15 or the DPS.
c. Reliability and resilience – A CSP is expected to implement appropriate policies
and procedures, and devote sufficient resources to ensure that its critical services
are available, reliable and resilient. Its business continuity management and
disaster recovery plans should therefore support the timely resumptions of its
critical services in the event of an outage so that the service provided fulfills the
terms of its agreement with the ODPS/DPS.
d. Technology planning – The CSP is expected to have in place robust methods to plan
for the entire lifecycle of the use of technologies and the selection of technological
standards.
e. Communication with users – A CSP is expected to be transparent to its users and
provide them sufficient information to enable users to understand clearly their
roles and responsibilities in managing risks related to their use of a CSP.

The contracting party16, the DPS or the ODPS, shall be responsible for ensuring that
the CSP meets the above-cited expectations and that operations of the CSP shall be
held to the same standards as if the services were provided by the DPS or ODPS itself.
The Bangko Sentral, however, is not precluded from directly engaging with and
exercising its oversight function over the CSP in accordance with the PSOF.

102.6 Assessment by the Bangko Sentral. The Bangko Sentral shall adopt the PFMI
assessment methodology (AM) to evaluate the observance of the relevant principles
by a DPS as well as identify possible risks and induce changes in the NPS. In
performing the PFMI assessment, the Bangko Sentral shall utilize the pertinent AM’s
rating scale as laid out in Appendix 102-2.

102.7 Enforcement Action. Enforcement Action under Subsection 102.7 was

transferred to Part 15 of the Manual.

(Circular No. 1126 dated 14 September 2021)

103 REGULATORY REPORTING STANDARDS FOR OPERATORS OF PAYMENT

SYSTEM (OPS)

103.1 Policy Statement. The Bangko Sentral recognizes that relevant, complete,
accurate, and timely reports are necessary for the effective oversight of the national
payment system. Reports of such qualities accordingly support the Bangko Sentral’s
determination of appropriate oversight tools, approaches, and interventions. Thus, the
Bangko Sentral adopts this reporting framework which shall govern the submission
of reports of an OPS.
15
Role of and requirements for an Operator of a Designated Payment System (ODPS)are provided in the PSOF.
16
The contracting party may either be the OOPS or the DPS through its appropriate governance body (i.e., payment
system management body such as the Philippine Payments Management, Inc.).
9
103.2 Reporting Standards. Reports submitted to the Bangko Sentral must be
accurate, complete, and timely to be considered compliant with the Bangko Sentral
reporting standards. Inputs to the reports shall be validated by the OPS prior to
submission to the Bangko Sentral to ensure accuracy, completeness and integrity of
information submitted therein. The reports shall reflect all the information required
by the Bangko Sentral. Reports with incomplete schedules or attachments shall be
considered non-compliant with the reporting standards prescribed in this Section.
Moreover, submission of reports shall be made within the timeline and in accordance
with reporting templates prescribed by the Bangko Sentral.

To be able to comply with these reporting standards, an OPS must have in place a
reporting system that has at least the following functionalities under both business-
as-usual and stressed conditions:
a. Generates accurate, complete and reliable information as required by the Bangko
Sentral and other regulatory bodies;
b. Aggregates all material data across various business lines, entities, services,
instruments and other groupings that are relevant to regulatory reporting; and
c. Produces in a timely manner, regular, on-demand, and ad hoc reports particularly
those required by the Bangko Sentral and other regulatory bodies.

For the purpose of this Section, a stressed condition shall refer to emergency
conditions for OPS such as a crisis, national or public health emergencies, weather-
related events, or sudden closures markets and/or clearing agencies the transactions
therein are processed through an OPS for eventual settlement.

103.3 Reporting Governance. The Board and senior management shall be responsible
for respectively adopting policies on and implementing an effective reporting system
that generates accurate, complete, and timely reports to the Bangko Sentral. In this
regard, the Board and senior management of an OPS shall establish regulatory
reporting procedures that ensure adherence to the reporting standards set by the
Bangko Sentral.

An effective reporting system shall have the following components:

a. A management information system, data architecture and technology
infrastructure:
(1) That are commensurate to the nature, scope, operational complexity and
systemic importance of the OPS’ business activities;
(2) That fully support reporting requirements; and
(3) That facilitate internal independent validation prior to submission of reports.

b. Documented policies and procedures, which should include, at a minimum:

(1) Processes for generating required reports which meet the standards prescribed
by the Bangko Sentral;
(2) Procedures to implement modifications in reporting processes, in order to
incorporate corrective measures and/or enhancements for the purpose of
addressing weaknesses identified during periodic reviews, responding to
changes in operating environment, or complying with new regulatory
reportorial requirements;
(3) Protocols that ensure timely reporting to the Board and senior management of
significant or unusual transactions, events, or activities that have material
impact on the quality of reports; and

10
 (4) Standards and procedures for maintaining adequate back-up copies of
essential business information, software and relevant documents that are
necessary for restoration of critical operations.

c. Periodic independent review of reporting processes and procedures to ensure

their continuing reliability and effectiveness. The appropriate frequency of such
review shall mainly depend on the systemic importance, risk profile and business
complexity of the OPS as well as the extent of recurrence of control weaknesses
that cause reporting exceptions. Such assessment shall be conducted by an
independent unit within the OPS (i.e., internal audit) or an independent external
party contracted by the OPS for such purpose, with expertise in relevant
information technology (IT), data management, and regulatory reporting.

103.4 Data Retention. OPS shall likewise adopt a policy requiring data and report
retention period of no less than five (5) years unless the OPS become a subject of an
investigation, a special examination of the Bangko Sentral or a criminal, civil, or
administrative case has been filed in a competent judicial or administrative body
where the OPS is involved as a party to the investigation. In such cases, the relevant
information shall be preserved beyond the five (5)-year period until such time that a
final judgment has been reached by the Bangko Sentral or by the judicial or
administrative body.

In cases where specific laws of Bangko Sentral issuances require a different retention
period, the longer retention period shall be observed.

103.5 Sanctions for Non-Compliance with the Reporting Standards. The following
guidelines shall govern the Imposition of sanctions to an OPS for non-compliance with
the reporting standards:

a. Definitions

(1) Erroneous Report - A report that was submitted within the prescribed deadline,
but is found to be non-compliant with the Bangko Sentral reporting standards
described in this Section shall be classified as “Erroneous”, Submission of an
Erroneous Report shall be considered as willful failure to comply with the
regulation.

(2) Delayed Report - A report that is compliant with the Bangko Sentral reporting
standards but was submitted after the prescribed deadline shall be classified
as “Delayed”. Submission of a compliant report beyond the deadline prescribed
by the Bangko Sentral shall be considered as willful delay in the submission of
reports.

(3) Unsubmitted - A report that was not submitted, or was submitted but do not
comply with the Bangko Sentral reporting standards by the time the next
report becomes due or upon lapse of thirty (30) business days from the report's
submission deadline, whichever comes first, shall be classified as
“Unsubmitted”. Non-submission of required reports shall be considered as
willful refusal to comply with the regulation.

Table 1 shall be used as reference for the defined number of business days after
a report’s submission deadline for such report to be considered “Unsubmitted”.

11
 Table 1-Number of days of delayed submission for report to be considered as
“Unsubmitted”
Reporting Frequency Defined number of business days
after report’s submission deadline
to be considered “Unsubmitted”
Daily 1
Weekly 7
Monthly
Quarterly
Semestral 30
Annual
Event-based/Ad-hoc*
*This refers to reports that the OPS are required to submit upon the occurrence
of an event/incident or upon request by the appropriate oversight department
of the Bangko Sentral for the purpose of conducting surveillance of the
payment system.

b. Monetary Penalties

The applicable monetary penalty shall be based on a prescribed fine for each
occurrence (in case of Erroneous reports) or for each day (in case of Delayed
reports) shown in Table 2. The penalties will accumulate until such time that the
report has been determined compliant with the prescribed reporting standards.

Table 2 – Prescribed fines for reporting violations

OPS Primary Reports Secondary Reports
OPS that are banks
Universal/Commercial Php 3,000.00 Php 600.00
Banks (U/KBs)
Thrift Banks (TBs) 1,500.00 300.00
Rural Banks/Cooperative 450.00 150.00
Banks (RCBs)
Non-bank OPS 300.00 60.00

For the purpose of this regulation, a non-bank OPS shall include non-bank
electronic money issuers (EMI-NBFI), clearing switch operators, and other non-
BSFIs that are registered with the Bangko Sentral as such.

Primary reports are those which shall be required of ODPS such as, but not limited
to, periodic surveillance reports which shall be due for daily, monthly or quarterly
submission to the Bangko Sentral. Meanwhile, Secondary Reports are those that
shall be required of non-designated OPS such as semi-annual payment services
report. Secondary reports shall also include Annual Reports which shall be
submitted by all OPS.

For Erroneous Reports, the penalty shall be computed by multiplying the

prescribed fine by the number of times the subject report was submitted before
being considered compliant.

12
 For Delayed Reports, the penalty shall be computed by multiplying the prescribed
fine by the number of calendar days delayed.

For Erroneous and Delayed Reports, the penalty shall be based on the sum of the
penalty for being Erroneous and the penalty for being Delayed.

For Unsubmitted Reports, the penalty shall be based on the amounts to be

prescribed in the oversight intervention and enforcement policy for all OPS which
shall be the subject of a separate issuance.

For the purpose of implementing the rules in this Section, the submission deadline
is considered moved to the next business day should it fall on a working day in the
locality where the reporting OPS is located or on a working day when the
operations in government were suspended due to typhoon, flood or other similar
fortuitous events. Failure to submit a report on time due to fortuitous events such
as fire, natural calamities, public disorders, or national emergencies shall not be
considered as willful delay or willful failure.

c. Non-monetary Sanctions

In addition to the monetary penalties that may be imposed based on the

preceding Subsection, the following non-monetary sanctions shall likewise be
imposed for Unsubmitted Reports:

(1) First Offense: warning on the Chief Executive Officer (CEO) and the board of
directors;

(2) Second Offense: reprimand on the CEO and the board;

(3) Third Offense: suspension of the CEO for at least one (1) month but not more
than one (1) year, depending on the nature and gravity of the violation or
irregularity;

(4) Further Offense/s: Possible disqualification of the CEO and/or the members of
the board.

In the case of an erring Operator of Designated Payment System (ODPS), the

Monetary Board may designate a manager to take over the operations of the
ODPS, upon determination of the appropriate oversight department that the
reporting deficiencies result in a threat to the safety, efficiency, and reliability
of the designated payment system, pursuant to Section 17 of Republic Act (R.A.)
No. 11127 or the National Payment Systems Act (NPSA).

The designated manager shall determine within the period prescribed by the
Monetary Board, but not to exceed one (1) year from the designation, whether
the ODPS is able to address the significant reporting deficiencies and whether
the same may be permitted to resume operations. The determination for
resumption of management of the ODPS shall be subject to prior approval of
the Monetary Board.

The extent of sanctions to be imposed under items “(3)” and “(4)” shall depend on the
following factors and the circumstances accompanying the non-submission of
required reports:
13
• The nature and significance of the unreported reportable items;
• The duration and habituality of the delinquency; and
• Whether the non-disclosure of the required information has caused delay on an
urgent oversight, supervisory assessment or investigation (i.e., for on-demand or
ad-hoc reports).

Pursuant to Section 19 of R.A. No. 11127 (The National Payment Systems Act) and
Section 37 of R.A. No. 7653 (The New Central Bank Act), as amended, the administrative
sanctions and other penalties in connection to non-compliance with the Bangko
Sentral’s regulatory reporting requirements for OPS, whether banks or non-banks, are
subject to review and approval by the Monetary Board or by the Governor, as
applicable. The resignation or termination from office shall not exempt the erring
director or officer from administrative or criminal sanctions under Section 19(b) of R.A.
No. 11127.

103.6 Bangko Sentral’s Assessment of the Reporting System. The oversight

department of the Bangko Sentral shall conduct an assessment of the quality of the
reporting system of an OPS in order to ascertain the accuracy, completeness and
integrity as well as the timeliness of their regulatory reports.

If the Bangko Sentral finds significant deficiencies (i.e., material deviations from
reporting standards) in the reporting system or evaluates habitual reporting
exceptions (i.e., frequent submission to the Bangko Sentral of erroneous or delayed
reports), the OPS concerned shall be required to submit a time-bound, Board-
approved action plan that shall articulate measures to address the noted deficiencies
that are acceptable to the Bangko Sentral.

The failure of the Board and senior management of an OPS to implement the required
corrective measures within the specified timeframes shall be a ground to subject the
OPS, and/or its directors, responsible officers and employees, to enforcement actions
described in Subsection 103.8.

103.7 Reportorial Requirements. The specific reportorial requirements, including the

report categories, signatories, frequencies, deadlines, and manner of submission to
the Bangko Sentral, shall be covered in a separate issuance by the Bangko Sentral.

103.8 Enforcement Action. Enforcement Action under Subsection 103.8 was

transferred to Part 15 of the Manual.

(Circular No. 1138 dated 1 March 2022)

14
 PART TWO
RETAIL PAYMENT SYSTEM

201 NATIONAL RETAIL PAYMENT SYSTEM FRAMEWORK

201.1 Adoption of NRPS Framework. It is the policy of the Bangko Sentral to promote
the establishment of a safe, efficient, and reliable retail payment system in the
Philippines. Towards this end, the Bangko Sentral adopts the National Retail Payment
System (NRPS) Framework consistent with Bangko Sentral regulations on risk
management in light of the complex interplay of different types of risk arising from
the rapid evolution of retail payment activities of Bangko Sentral supervised financial
institutions (BSFIs). The NRPS vision will help achieve higher economic growth and
enhance the overall competitiveness of our economy.

In carrying out retail payment-related activities, BSFIs shall adhere to the NRPS
Framework as set forth in this Section and Appendix 201-1. This framework requires
BSFIs to ensure that the retail payment systems they participate in demonstrate
sound risk management, and effective and efficient interoperability. BSFIs shall
comply with Bangko Sentral rules and regulations, particularly on information
technology, consumer protection, and anti-money laundering/combating the
financing of terrorism (AML/CFT).

201.2 Purpose and scope. The NRPS Framework shall apply to all BSFIs which meet
regulatory requirements and the criteria set on a per Automated Clearing House
(ACH) basis under the NRPS framework.

The NRPS framework covers all retail payment-related activities, mechanisms,

institutions and users. It applies to all domestic payments which are denominated in
Philippine Peso (Php), and which may be for payments of goods and services,
domestic remittances or fund transfers.

Retail payments under the NRPS Framework are payments that meet at least one of
the following characteristics:
a. the payment is not directly related to a financial market transaction;
b. the settlement is not time-critical;
c. the payer, the payee, or both are individuals or non-financial organizations; and
d. either the payer, the payee, or both are not direct participants in the payment
system that is processing the payment.

201.3 NRPS key principles. Under the NRPS framework, sound governance shall be
performed by a payment system management body (PSMB), an industry-led self-
governing body that is duly recognized and overseen by the Bangko Sentral. In the
absence of a PSMB which conforms to the NRPS principles in Appendix 201-1, the
functions of providing sound governance to the retail payment system participated in
by BSFIs shall be discharged by the Bangko Sentral. Clearing switch operators shall
not participate in the governance of the payment system.

All clearing shall be done within the NRPS governance structure, wherein exclusive
bilateral clearing arrangements are not allowed.

Non-discriminatory participation shall be espoused in the retail payment system.

Hence, all BSFIs are highly encouraged to join the NRPS governance structure
provided they meet the qualification criteria.
15
A reasonable market-based and transparent pricing mechanism shall be adopted by
all BSFIs participating in the NRPS governance structure.

Further details on the key principles are embodied in the NRPS Framework shown in
Appendix 201-1.

201.4 Specific rules applicable to transactions performed under the NRPS

framework. The following rules shall apply to retail payment transactions which are
cleared and settled in accordance with the NRPS Framework:

a. Minimum requirements to offer Electronic Payment and Financial Service (EPFS).

EPFS, which shall require Bangko Sentral approval in accordance with Sec.
X701/47010/4641S/4641P/4641N of the MORB/MORNBFI, refer to BSFI products
and/or services that enable consumers to carry out or initiate payments
electronically, financial transactions and other related services through a point of
interaction. To offer EPFS, BSFIs shall conform to the following requirements:

(1) BSFIs shall make electronic payments available in all its delivery channels
whenever applicable;

(2) BSFIs shall enable its clients to move/receive funds to/from accounts with other
BSFIs, or, at a minimum, receive funds. Movement of funds between BSFIs shall
be carried out through participation in an ACH;

(3) BSFIs shall immediately credit the account of its clients after receipt of clearing
advice; and

(4) BSFIs shall conform to Section X701/47010/4641S/4641P/4641N of the

MORB/MORNBFI the IT Risk Management Standards and Guidelines on
electronic banking, electronic payment, electronic money and other electronic
products and services provided in Appendix 75f/Q-59f the MORB/MORNBFI.

b. Fees on transactions. The BSFI’s board of directors shall adopt a policy on the
imposition of any fee on electronic payment transactions. The policy shall include
the basis and quantitative support for the setting of fees and rationalization of the
fee structure or amount. Imposition of fees for transactions performed by BSFIs
that meet the requirements in Item “a” of this Subsection shall be consistent with
the following:

(1) On consumer pricing –

(a) BSFIs shall adopt reasonable and fair market-based pricing models, which
do not arise from agreements with other BSFIs to fix the price of product or
service delivery.
(b) The service fees for electronic payments are expected to be lower than the
fees collected from transactions made manually or over-the-counter (OTC)
as electronic payments are considered to provide more efficient and cost-
effective means of delivering service.
(c) The recipient shall not pay for electronic crediting to recipient’s account and
the recipient shall receive the amount in full. Such account-to- account fund
transfers shall not be considered as domestic remittance transactions under
Sections 298/251-Q/241-S/202-N of the MORB/MORNBFI.

16
 (2) The BSFI shall disclose to the Bangko Sentral the details of all fees that will be
charged to the client. This will be posted in an electronic bulletin board of fees
for transactions performed under the NRPS framework. The bulletin board shall
be maintained by the Bangko Sentral in its website for enhanced transparency
and competitiveness.

c. Anti-Money Laundering Requirements. All BSFIs shall observe applicable AML/CFT

requirements under Part Eight of the MORB/MORNBFI for all transactions
performed under the NRPS framework. As part of on-going monitoring of
customers and their transactions, the following rules shall apply to transactions
performed under the NRPS framework by BSFIs that meet the requirements in
Item “a” of this Subsection:

(1) The originating institution (OI) shall be responsible for monitoring, including
appropriate watchlist screening or monitoring, its own clien’'s transactions. It is
the responsibility of the Ol to ensure that the account name of the source
account and the amount are consistent with the Sender Name and the amount
indicated in the Payment Instruction sent by the Ol.

(2) The receiving institution (RI) shall be responsible for monitoring, including
appropriate watchlist screening or monitoring, its own client’s transactions. It
is the responsibility of the RI to ensure that the actual account number credited
and the amount are consistent with the Beneficiary Account Number and the
amount indicated in the Payment Instruction received by the Rl.

(3) On the basis of the above, account number matching will suffice for domestic
account-to-account electronic payments. Ols and Rls shall ensure that
customers are informed that account number matching will suffice to
implement a transaction, and Ols and RIs shall be held free and harmless from
liability for their reliance on account number matching.

(4) Nothing in the above rules shall prevent an OI or RI from instituting or

implementing additional procedures to comply with AML laws and regulations,
and other applicable laws and regulations, prior to executing a transaction
performed under the NRPS framework, or debiting/crediting a client’s account.

d. BSFIs participating in the NRPS governance structure are required to comply with
existing regulations of the Bangko Sentral.

201.5 Reports. BSFIs participating in the NRPS governance structure shall comply with
regular reporting requirements, which will be covered by a separate issuance.

201.6 Examination of BSFIs. BSFIs shall make available all policies, procedures and
other documents/information related to this Section during the on-site examination,
as well as provide copies thereof when a written request is made by the Bangko
Sentral.

201.7 Sanctions. Consistent with Section X009/4009Q, the Bangko Sentral may
deploy enforcement actions to promote adherence to the requirements set forth in
Section X1205/41205Q/4705S/4705P/4805N the MORB/MORNBFI and bring about
timely corrective actions. The Bangko Sentral may issue directives to enforce
compliance with the NRPS Framework or impose sanctions to limit the level of or

17
suspend any business activity that has adverse effects on the safety and soundness of
the BSFI, among others.

Any violation of this Section shall subject the BSFI and/or its directors, officers and/or
employees to the monetary and non-monetary sanctions under Section 37 of
Republic Act (R.A.) No. 7653, including but not limited to the following depending on
the gravity of the violation committed and the circumstances attendant thereto:

a. Suspension of offering new electronic financial products and services;

b. Suspension/revocation of authority to provide electronic financial products and
services; and
c. Suspension/revocation of authority to settle through the Philippine Payments and
Settlements System

201.8 Enforcement Action. Enforcement Action under Subsection 201.8 was

transferred to Part 15 of the Manual.

(Circular No. 980 dated 06 November 2017 and Circular No. 1161 dated 29 November
2022)

18
PART THREE
RESERVED

19
 PART FOUR
GOVERNANCE AND OVERSIGHT

401 GOVERNANCE POLICY FOR OPERATORS OF PAYMENT SYSTEM

401.1 Policy Statement. The Bangko Sentral recognizes that the OPS play an
important role in sustaining the safe and efficient flow of payments including those
arising from critical financial market transactions between and among banks and
non-banking financial institutions, including cooperatives. Being generally
responsible for interlinking these institutions that execute payment orders in their
normal course of business, the OPS are also crucial in maintaining the public's
confidence in the financial system.

In this regard, the Bangko Sentral adopts the following governance policy which is
aligned with the applicable Principles for Financial Market Infrastructures (PFMIs)
recommended by the Committee of Payments and Settlement Systems of the Bank
for International Settlements and the Technical Committee of the International
Organization of Securities Commissions. These guidelines provide specific regulatory
expectations in the application of certain principles in consideration of national
conditions.

401.2 Scope and Applicability. This policy covers all registered OPS including the
Bangko Sentral, being the operator of the real time gross settlement (RTGS) system.
Other OPS include the (i.) Bangko Sentral-supervised financial institutions (BSFIs)
which include banks and non-bank financial institutions (NBFIs) such as non-bank
electronic money issuers (EMI-NBFIs); and (ii.) non-BSFIs such as cooperatives which
are regulated by the Cooperative Development Authority (CDA), branches and
subsidiaries of foreign incorporated entities as well as other domestic corporations
and non-corporate entities, whose businesses are considered that of an OPS under
existing Bangko Sentral regulations.

For BSFIs
An OPS that has concurrent licenses such as a banking license or a license to be an
EMI­NBFI shall adhere with the more stringent requirements between the guidelines
in this policy and the applicable provisions of the Manual of Regulations for Banks
(MORB) and the Manual of Regulations for Non-Bank Financial Institutions (MORNBFI)
to be able to comply with the overall regulatory expectations of the Bangko Sentral.

The policy cross refers to certain governance standards under the MORB and the
MORNBFI since these requirements are also applicable to all OPS regardless of their
concurrent authorities.

For branches or local subsidiaries of foreign incorporated OPS

An OPS. whose Head Office or Parent Company is under the jurisdiction of a foreign
regulator, shall follow the more stringent requirements between the provisions of this
policy and those prescribed by the relevant regulator in its home jurisdictions.

In case the requirements of the home regulator prevail, the governance arrangements
being observed by the Head Office or Parent Company that are in accordance with
the requirements of the relevant regulator in its home jurisdiction may be used as a
means to comply with the Bangko Sentral's policy. Proof of compliance with the
requirements of the relevant regulator shall be made available upon request of the
oversight department of the Bangko Sentral. Failure to submit proof of compliance
20
with the requirements of the relevant regulator shall be deemed a violation of this
provision and shall subject the OPS to appropriate enforcement actions under Bangko
Sentral regulations.

In this context, a branch of a foreign incorporated OPS shall refer to any permanent
office or place of business in the Philippines where an OPS may perform activities and
provide products and services that are within the scope of its authority as an OPS. and
of its other licenses, if any.

The provisions in Sections 401.1 to 401.9 apply to all OPS. Moreover, Sections 401.10 to
401.11 shall additionally apply to operators of a payment system that has been
designated by the Bangko Sentral, pursuant to the provisions of Republic Act No. (R.A.)
No. 11127 or the National Payment Systems Act (NPSA).

For OPS that are BSFIs, local subsidiaries or branches of foreign entities and other
domestic corporations:

a. Affiliate shall refer to an entity linked directly or indirectly to an OPS by means of:
(1) Ownership, control, or power of the OPS to vote of at least twenty percent (20%)
of the outstanding voting stock of the entity or vice-versa;
(2) Interlocking directorship or officership, where the concerned director or officer
owns, controls, or possesses the power to vote, at least twenty percent (20%) of
the outstanding voting stock of the entity;
(3) Common ownership, whereby, the common stockholders own at least ten
percent (10%) of the outstanding voting stock of the OPS and at least twenty
percent (20%) of the outstanding voting stock of the entity;
(4) Management contract or any arrangement granting the OPS the power to
direct or cause the direction of management and policies of the entity; or
(5) Permanent proxy or voting trusts in favor of the OPS constituting at least twenty
percent (20%) of the outstanding voting stock of the entity or vice-versa.

b. Close family members shall refer to persons related to directors, officers, or

stockholders (DOS) of an OPS within the second degree of consanguinity or affinity,
legitimate or common-law. These shall include the spouse, parent, child, brother,
sister, grandparent, grandchild, parent-in-law, son-/daughter-in-law,
brother/sister-in-law, grandparent-in-law, and grandchild-in-law of the OPS’ DOS.

c. Control of an enterprise exists when any of the following conditions is present:

(1) Power over more than half of the voting rights by virtue of an agreement with
other stockholders;
(2) Power to govern the financial and operating policies of the enterprise under a
statute or an agreement;
(3) Power to appoint or remove the majority of the members of the board of
directors or equivalent governing body;
(4) Power to cast the majority votes at meetings of the board of directors or
equivalent governing body;
(5) Any other arrangement similar to any of the above.

Control is presumed to exist if there is ownership or holding, whether direct or

indirect of twenty percent (20%) or more of a class of voting shares of a company.
Should the OPS choose to disclaim or rebut this presumption, it should provide
sufficient facts to show that there is indeed no control. Further, the OPS disputing
the presumption of control shall submit a written commitment stating that:
21
 (a) shares owned or held are exclusively for investment purposes;
(b) the OPS-stockholder will not serve on the board of directors of the OPS and
will not nominate any candidate to serve on the board of directors or
otherwise seek board representation;
(c) the OPS-stockholder will only have limited contact with the management
of the OPS;
(d) the OPS-stockholder will engage only in normal and customary
transactions with the OPS; and
(e) the OPS will not pledge shares acquired to secure a loan with any
institution.

d. Corresponding persons in the affiliated companies of the OPS shall refer to the
DOS of the affiliated companies and their close family members.

e. Directors shall refer to a person who is:

(1) named as such in the articles of incorporation;
(2) duly elected in the subsequent meetings of the stockholders; and
(3) elected to fill vacancies in the board of directors.

f. Independent directors shall refer to a person who:

(1) is not or was not a director, officer, or employee of the OPS and the payment
system participants17, their subsidiaries. affiliates. or related interests during the
past three (3) years counted from the date of his election/appointment;
(2) is not or was not a director, officer, or employee of the OPS and the payment
system participants’ substantial stockholders and their related companies
during the past three (3) years counted from the date of his
election/appointment;
(3) is not an owner of more than two percent (2%) of the outstanding shares or a
stockholder with shares of stock sufficient to elect one (1) seat in the board of
directors of the OPS or of the payment system participants, or in any of their
related companies or of their majority corporate stockholders;
(4) is not a close family member of any director, officer, or stockholder holding
shares of stock sufficient to elect one (1) seat in the board of directors of the
OPS, or of the payment system participants, or any of their related companies,
or any of their substantial stockholders;
(5) is not acting as a nominee or representative of any director or substantial
stockholder of the OPS, or of the payment system participants, or any of their
related companies, or any of their substantial stockholders;
(6) is not or was not retained as a professional adviser, consultant, agent, or counsel
of the OPS, or of the payment system participants, or any of their related
companies, or any of their substantial stockholders, either in his personal
capacity or through his firm during the past three (3) years counted from the
date of his election;
(7) is free from any business or other relationship with the OPS, the payment
system participants, and any of their related companies or with any of their
substantial stockholders, unless transactions are conducted at arm's length
and could not materially interfere with or influence the exercise of his
judgment;
(8) was not appointed by the OPS, or by the payment system participants, their
subsidiaries, affiliates, or related interests as Chairman “Emeritus”, “Ex-Officio”

17
For the purpose of these guidelines a payment system participant includes payment service providers (PSPs) and
critical service providers (CSPs)
22
 Directors/Officers or Members of any Advisory Board, or otherwise appointed in
a capacity to assist the board of directors in the performance of its duties and
responsibilities during the past three (3) years counted from the date of his
appointment;
(9) is not affiliated with any non-profit organization that receives significant
funding from the OPS or from the payment system participants or any of their
related companies or substantial stockholders; and
(10) is not employed as an executive officer of another company where any of the
executives of the OPS or of the payment system participants serve as directors.

g. Majority stockholder shall refer to a person, whether natural or juridical, owning

more than fifty percent (50%) of the voting stock of an OPS.

h. Non-executive directors shall refer to those who are not part of the day-to-day
management of operations and shall include the independent directors. Not all
non-executive directors are considered independent directors.

i. Officers shall include the chief executive officer, executive vice-president, senior
vice-president, vice-president. general manager, secretary and others mentioned
in the by-laws, or are generally known to be the officers of the OPS either through
announcement, representation, publication, or any kind of communication made
by the OPS.

Provided, that a person holding the position of chairman or vice-chairman of the

board of directors or another position in the board of directors shall not be
considered as an officer unless the duties of his position in the board of directors
include functions of management such as those ordinarily performed by regular
officers. Provided further, that members of a group or committee, including sub­
groups or sub-committees whose duties include functions of management such
as those ordinarily performed by regular officers, and are not purely
recommendatory or advisory, shall likewise be considered as officers.

j. Parent company shall refer to a corporation which has control over another
corporation directly or indirectly through one (1) or more intermediaries.

k. Related Company shall refer to another company which is:

(1) the parent or holding company of the OPS;
(2) the subsidiary or affiliate of the OPS; or
(3) a corporation where the OPS or its majority stockholder owns such number of
shares that will allow/enable such a person or group to elect at least one (1)
member of the board of directors, or a partnership where the majority
stockholder of the OPS is a partner.

l. Related interests shall refer to any of the following:

(1) Spouse or relative within the first degree of consanguinity or affinity, or relative
by legal adoption, of a DOS of the OPS;
(2) Partnership of which a DOS of an OPS or his spouse or relative within the first
degree of consanguinity or affinity, or relative by legal adoption, is a general
partner;
(3) Corporation, association, or firm of which any or a group of DOS of the OPS
and/or their spouses or relatives within the first degree of consanguinity or
affinity, or relative by legal adoption, hold or own at least twenty percent (20%)
of the subscribed capital of such a corporation, or of the equity of such an
23
 association or firm.
(4) Corporation, association, or firm wholly or majority- owned or controlled by any
related entity or a group of related entities mentioned in Items “I(2)” and “I(3)”
of this Subsection;
(5) Corporation, association, or firm which owns or controls directly or indirectly
whether singly or as a part of a group of related interest. at least twenty percent
(20%) of the subscribed capital of a substantial stockholder of the OPS, or
which controls majority interest of the OPS; or
(6) Corporation, association, or firm which has an existing management contract
or any similar arrangement with the parent of or controlling interest in the OPS.

m. Related Parties shall cover the OPS’ subsidiaries as well as affiliates and any party
(including their subsidiaries, affiliates, and special purpose entities) that the OPS
exerts direct/indirect control over or that exerts direct/indirect control over the
OPS, any of the OPS’ Directors, Officers, Stockholders or Related Interests (DOSRI),
and their close family members. as well as corresponding persons in the affiliated
companies of the OPS.

These shall also include such other person/juridical entity whose interests may
pose potential conflict with the interest of the OPS.

n. Related party transactions (RPTs) shall refer to transactions or dealings of the OPS
with its related parties. These shall include, but are not limited to, the following:
(1) Outsourcing of critical services for payment system operations;
(2) Consulting, professional, agency, and other service arrangements/contracts;
(3) Purchases or sales of assets, including transfer of technology, and intangible
items (i.e., research and development, trademarks and license agreements);
(4) Construction arrangements and contracts;
(5) Lease arrangements and contracts;
(6) Borrowings, commitments, fund transfers; and guarantees;
(7) Sale, purchase, or supply of any good or materials; and
(8) Establishment of joint venture entities.

o. Stockholder shall refer to any stockholder of record in the books of the OPS, acting
personally, or through an attorney-in-fact; or any other person duly authorized by
him, or through a trustee designated pursuant to a proxy or voting trust or other
similar contracts, whose stockholdings in the OPS. individually and/or collectively
with the stockholdings of: (1) his spouse and/or relative within the first degree by
consanguinity or affinity or legal adoption; (2) a partnership in which the
stockholder and/or the spouse and/or any of the abovementioned relatives is a
general partner; (3) corporation, association or firm of which the stockholder
and/or his spouse and/or the aforementioned relatives own more than fifty percent
(50%) of the total subscribed capital stock of such corporation, association or firm,
amount to one percent (1%) or more of the total subscribed capital stock of the
OPS.

p. Substantial Stockholder shall refer to a person, or group of persons whether

natural or juridical, owning such number of shares that will allow such a person or
group to elect at least one (1) member of the board of directors of an OPS, or who
is directly or indirectly the registered or beneficial owner of more than ten percent
(10%) of any class of the OPS’ equity security.

q. Subsidiary shall refer to a corporation or firm, where a parent company directly or

24
 indirectly owns, controls, or holds with power to vote, more than fifty percent (50%)
of the outstanding voting stock of such corporation or firm.

For the OPS organized as Cooperatives:

r. Director shall refer to any member of a cooperative who was elected by the General
Assembly, and/or appointed by the board in case of vacancy, who under the by-
laws of the cooperative has the right to vote and who possesses all the
qualifications and none of the disqualifications provided in the by-laws or rules
governing cooperatives.

s. General Assembly shall mean the full membership of the cooperative duly
assembled for the purpose of exercising all the rights and performing all the
obligations of the cooperative pursuant to R.A. No. 9520 or the Philippine
Cooperative Code, its articles of cooperation, and by-laws.

t. Independent director shall refer to a person who:

(1) is a duly elected/appointed director which has a share capital of not more than
one percent (1%) of the total paid-up capital of the cooperative, and possesses
the required competence required in the performance of his functions;
(2) is not related to an OPS’ director, officer, or member within the second degree
of consanguinity or affinity, legitimate or common-law;
(3) is free from any business or other relationship with the OPS, except for his
membership, the payment system participants, and any of their substantial
stockholders, unless his transactions are conducted at arm’s length and could
not materially interfere with or influence the exercise of his judgment;
(4) is not or was not retained as a professional adviser, consultant, agent, or counsel
of the OPS or of the payment system participants, either in his personal
capacity or through his firm during the past two (2) years counted from the date
of his election;
(5) is not affiliated with any non-profit organization that receives significant
funding from the OPS or from the payment system participants;
(6) is not acting as a nominee or representative of any participant in the payment
system operated by the cooperative; and
(7) is not employed as an executive officer of another company where any of the
executives of the OPS or of the payment system participants serve as directors.

u. Non-executive directors shall refer to the same definition under item “h".

v. Officer shall refer to the same definition under item “i", notwithstanding the
definition of officer in R.A. No. 9520.

w. Member of the Cooperative is a person, either natural or juridical, who has been
admitted by the cooperative as a member upon his/its adherence to the principles
set forth in R.A. No. 9520 and in the Articles of Cooperation.

x. Substantial Shareholder shall refer to a primary cooperative with enough shares to

elect a seat in the board, or those with at least ten percent (10%) ownership of the
cooperative’s equity.

For all OPS:

y. Risk Appetite Statement shall refer to an articulation in written form of the

25
 aggregate level and types of risks that an OPS is willing to accept, or to avoid, in
order to achieve its business objectives. It includes qualitative statements as well
as quantitative measures involving systemic, financial, and operational risks that
could build up in the payment system in the course of its operations.

z. Risk governance framework shall refer to the framework through which the board
of directors, as applicable. and management of an OPS establish business strategy;
articulate and monitor adherence to risk appetite and risk limits; and identify,
measure, and manage risks.

aa. Risk limits shall refer to the application of an OPS’ risk appetite statement to
specific risk categories (i.e., settlement, liquidity, operational, etc.).

ab. Stakeholders shall refer to payment system participants, end-users and other
financial market infrastructures (FMIs), the operations of which are significantly
interconnected with that of the payment system.

401.3 Governance Arrangements. An OPS that is a BSFI, a cooperative, a local

subsidiary or branch of a foreign incorporated entity, or a domestic corporation shall
adopt an effective and documented governance structure that provides clear and
direct lines of responsibility and accountability of the board of directors and senior
management. At a minimum, the documented governance structure should include
the following:

a. Governance structures and descriptions of:

(1) the roles and responsibilities of the board of directors and board-level
committees;
(2) structure of senior management;
(3) reporting lines between the board and senior management; and
(4) the authorities and responsibilities of the General Assembly, for OPS organized
as cooperatives.

b. Design of risk management, compliance, internal control, and audit functions,

including descriptions of the mechanisms by which these functions are granted
adequate authority, independence, resources, and reporting access to the board
and/or relevant board-level committees;

c. Guidelines for appointment and performance evaluation of the directors and

officers; and

d. Policies for addressing conflicts of interest and outsourcing issues arising from an
OPS’ business connections with its affiliates and other related parties.

For OPS that are branches or local subsidiaries of foreign incorporated OPS

Given their distinct organizational structures, OPS which are branches and local
subsidiaries of foreign entities shall adopt appropriate governance arrangements (i.e.,
Local Management Committee) through which the Head Office or Parent Company
of the OPS oversee local operations and enforce commensurate standards on risk
management, compliance, internal controls, and audit in conducting business as an
OPS in the country. Their governance arrangements shall likewise incorporate the
corresponding details enumerated in items “a" to “d" in the preceding paragraph.
26
Reports on the assessment of the risk management, compliance, internal controls and
audit functions of branches of foreign incorporated OPS, conducted by competent
and independent parties shall be made available to the Bangko Sentral. during on-
site examination or any time upon request. These required reports may come from the
regional teams of the OPS’ respective groups handling the said functions which may
or may not necessarily be part of their local physical operations.

These aforementioned governance arrangements shall be documented in the policies

of the OPS which shall be made available to the appropriate oversight department of
the Bangko Sentral, the OPS’ stockholders or members, and the participants in the
payment system.

401.4 Board of Directors. Sections 401.4 to 401.6 shall apply to an OPS that is a BSFI, a
cooperative, a branch or a local subsidiary of a foreign incorporated entity, or a
domestic corporation.

Powers of the board of directors. The OPS shall conduct its business, and control its
resources through its board of directors. The directors have the duty to exercise sound
and objective judgment for the best interest of the OPS, the payment system's
participants, and other stakeholders.

Composition of the board of directors.

a. The board of directors of an OPS that is a BSFI shall be composed of not less than
five (5) nor more than fifteen (15) members.

Likewise, an OPS that is organized as a cooperative, shall have a board of directors

which shall be composed of not less than five (5) nor more than fifteen (15)
members who shall all be elected by the General Assembly for a term of two (2)
years, pursuant to R.A. No. 9520.

The board shall determine the appropriate number of its members to ensure that
it is commensurate to the nature, size, and complexity of the OPS’ activities,
subject to compliance with relevant rules and regulations.

b. The board of directors, as a governing body, shall have integrity and it shall possess
the appropriate collective skills, work experiences, and technical knowledge of
payment systems and financial markets, including the risks involved in the
operation of these systems.

c. Independent director/s of an OPS shall represent at least twenty percent (20%) of

the members of the board, but in no case shall be less than one (1). Provided, that
any fractional result from applying the minimum proportion (i.e., 20%) shall be
rounded up to the nearest whole number.

d. Non-Filipino citizens may become members of the board of directors of an OPS to

the extent of the foreign participation in the equity of the said OPS as allowed
under existing laws and regulations, except in the case of cooperatives.

Qualifications of a director.

a. A director shall have the following minimum qualifications:

27
 (1) He must be fit and proper for the position of a director. In determining whether
a person is fit and proper for said position, the following qualifications must be
considered: integrity/probity, physical/mental fitness; relevant education/
financial literacy/ training; possession of competencies relevant to the job, such
as knowledge and experience, skills, diligence, and independence of mind; and
sufficiency of time to fully carry out responsibilities.

In assessing a director’s integrity/probity, consideration shall be given to the

director’s market reputation, observed conduct and behavior, as well as his
ability to continuously comply with the organization’s policies and applicable
laws and regulations, including payment system rules, and the relevant
requirements and standards of any regulatory body, clearing house, payment
system management body, or the government and any of its
instrumentalities/agencies.

A director of an OPS shall be equipped with adequate technical training on

payments and/or appropriate work experience to be able to understand
payment system operations, financial markets, and payment-related risks.

An elected director has the burden to prove that he possesses all the foregoing
minimum qualifications and none of the cases mentioned under Section 401.8
(Persons disqualified to become directors/officers).

The foregoing qualifications shall be in addition to those required or prescribed

under other applicable laws and regulations.

(2) He must have attended a seminar on corporate governance for board of

directors. The requirements under item “a(2)” of Sections 132/132-Q of the
MORB/MORNBFI (Qualifications of a director) shall hereby apply.

For directors of OPS organized as cooperatives, directors should have

completed the mandatory trainings required by the CDA18.

(3) With regard to a cooperative OPS, it may, by resolution of its board of directors,
admit as a director, or a board-level committee member, a non-member
individual who was appointed by any financing institution from which the
cooperative received financial assistance. Provided further, that such a director
or a committee member shall neither have powers nor responsibilities except
to provide the technical assistance required by the cooperative.

b. In selecting an independent and a non-executive director, the number and types

of entities where the candidate is likewise elected as such shall be considered to
ensure that he can devote sufficient time to be able to effectively carry out his
duties and responsibilities. In this regard, the guidelines under item “b” of Sections
132/132-Q of the MORB/MORNBFI (Independent and non-executive directors) shall
apply.

c. Members of the board of directors shall not be appointed as Corporate or Board

Secretary or Chief Compliance Officer.

18
Pursuant to its Memorandum Circular 2015-09, CDA requires directors and officers of a cooperative to undergo a set
of required trainings and have them completed within the first half of their term
28
d. The CEO or President shall be a director of a corporate OPS while in the case of a
cooperative OPS, members of the board of directors shall not hold any other
position directly involved in the day-to-day operations and management of the
OPS19.

Chairperson of the board of directors.

a. Roles of the Chairperson of the board of directors. Being the leader of the board,
the Chairperson shall be primarily responsible for the effective implementation of
governance arrangements. He shall ensure that:
(1) the meeting agenda focuses on strategic matters involving stakeholder
interests, including discussions on risk appetite, and key governance and
operational concerns;
(2) the board practices a sound decision making process;
(3) the board is open to critical discussions and that dissenting views can be
expressed and discussed within the decision-making process;
(4) the board receives accurate, timely, and relevant information from
management;
(5) first time directors undergo proper orientation and all directors are provided
training opportunities; and
(6) the work performances of the members of the board are evaluated at least once
a year.

b. Qualifications of the Chairperson of the board of directors. To promote checks and

balances, the Chairperson of the board of directors shall be a non-executive
director or an independent director. Provided, that the Chairperson and CEO
positions in any OPS shall not be held by one person.

Provided further, that exceptions to these rules shall be subject to approval by the
Monetary Board. In which case, the board of directors of an OPS shall appoint a
lead independent director and define his responsibilities. Such responsibilities
shall be documented in a governance manual. The board of directors shall ensure
that the lead independent director functions in an environment that objectively
evaluates the views and strategic stance of the CEO. The lead independent director
shall perform enhanced function over the other independent director/s and shall:
(1) spearhead the independent directors in raising queries and pursuing relevant
matters during board meetings; and (2) preside over the independent directors’
meetings, which shall be conducted without the presence of the executive
directors.

In case an OPS appoints only one (1) independent director, the Chairperson shall
not be allowed to have a concurrent position as CEO.

Board of directors meetings. An OPS shall include in its by-laws a provision that
physical or virtual meetings of the board of directors shall be held or hosted either in
the Philippines or abroad.

a. Full board of directors meetings

The meetings of the board of directors may be conducted through modern

technologies, using video conferencing at a minimum, as long as the director who

19
This is consistent with Article 39 of R.A. No. 9520.
29
 is taking part in the said meetings can actively participate in the discussions and
deliberations, if any: Provided, That every member of the board of directors shall
physically or virtually take part in at least fifty percent (50%) of all meetings every
year. Provided further, that attendance and participation of members in
committee meetings shall be considered in the assessment of continuing fitness
and propriety of each director as member of board-level committees and the
board of directors and that the absence of a director in more than fifty percent
(50%) of all meetings of the board of directors during his incumbency is a ground
for disqualification in the succeeding election.

b. Board-level committee meetings

A board-level committee shall meet as prescribed in its charter. The participation

of committee members may likewise be in person or through modern
technologies.

c. Minutes of the meetings

Detailed record or minutes of the meeting shall be maintained by the corporate or

board secretary to ensure all relevant issues were discussed during board
meetings. Members of the board shall sign (physically or electronically) or approve
the minutes of the meeting.

401.5 Duties and Responsibilities of the Board of Directors/a Director.

Specific Duties and Responsibilities of the Board of Directors

The board of directors of an OPS is ultimately responsible for upholding the safety and
efficiency of the payment system operation by ensuring that the board’s overall
strategies and critical decisions appropriately address the legitimate interests of
payment system participants and other relevant stakeholders. The board shall
approve and oversee the implementation of strategies to achieve business goals and
meet public policy objectives concerning the safety, efficiency, and reliability of the
payment system. It shall also oversee the implementation of the risk governance
framework and internal controls.

Likewise, the board of directors shall establish a sound framework that addresses
conflicts of interest and makes the board accountable for the selection of key senior
officers including the heads of control functions. The board shall also oversee the
performance of senior management, including the CEO.

a. The board shall be responsible for establishing and approving the strategic
objectives of the OPS and for overseeing the management’s pursuit of these
objectives. In this regard, the board of directors shall:
(1) Ensure that the payment system has a beneficial influence in maintaining
financial stability by continuously providing safe and efficient payment services
and facilities that are supportive of the needs of the national economy;
(2) Approve the OPS’ strategic objectives and business plans which shall take into
account the OPS’ long-term business interests, the level of risk tolerance,
capability to effectively manage risks and stakeholder considerations;
(3) Actively engage in the affairs of the OPS and keep abreast of its operating and
regulatory environment, as well as act in a timely manner to protect the
interests of the OPS and its stakeholders; and
30
 (4) Approve and oversee the implementation of policies governing major areas of
operation. The board of directors shall regularly review these policies as well as
control functions (i.e., risk management, compliance, and internal control) to
determine the areas needing improvement and promptly identify and address
significant risks and systemic concerns.

b. The board of directors shall be responsible for the appointment/selection of the

key members of senior management and heads of control functions, and for the
approval of a sound remuneration and other incentives policy for personnel. In this
regard, the board shall:
(1) Apply the fit and proper standards where integrity, technical expertise, and
experience in payment system operations and financial markets are the key
considerations in the selection process.
(2) Approve and oversee the implementation of performance standards as well as
remuneration and other incentives policy. The policy should promote safety
and efficiency in the operations of the OPS and should be consistent with the
OPS’ long-term business objectives and financial soundness.
(3) Oversee the performance of senior management and heads of control
functions:
(a) The board shall regularly monitor and assess the performance of the
management teams and heads of control functions based on approved
performance standards;
(b) The board shall hold the members of senior management accountable for
their actions and clearly communicate to them the possible consequences
if those actions are not aligned with the board’s performance expectations;
and
(c) The board shall regularly meet with senior management to engage in
discussions, and critically review the reports and information provided by
senior management.
(4) Ensure that the expertise and knowledge of all members of senior
management remain relevant by providing them with regular training
opportunities as part of a professional development program that aims to
enhance their competencies and allows them to stay abreast of developments
that are relevant to their areas of responsibility.

c. The board shall be responsible for approving and overseeing the implementation
of the governance framework of the OPS. In this regard, the board shall:
(1) Define appropriate governance structure and practices, and ensure that such
practices are followed and periodically reviewed:
(a) The board shall adopt a structure, in terms of board size and frequency of
meetings, that shall promote efficiency of oversight, critical discussion of
issues, and thorough review of matters requiring board action. In doing so,
it shall adopt governance policies concerning composition of the board,
appointment of directors, and duration of their tenures in the board.
(b) The board shall create committees to increase efficiency and allow deeper
focus on specific areas. The scope of the functions of these committees shall
depend on the importance of the OPS in supporting critical payment
transactions, preserving public interest, and maintaining public trust in
payment systems in general.
(c) The board shall objectively assess at least annually its performance as a
governing body, and the performances of the individual directors, the
various committees, and the CEO. The assessment may be conducted by a
corporate governance committee or by an external facilitator.
31
 (d) The board shall maintain appropriate records (i.e., meeting minutes or
summaries of matters reviewed, recommendations made, decisions taken,
and dissenting opinions expressed) of its deliberations and decisions. The
board shall ensure that independent views and relevant stakeholders’
interests are given due consideration in the discussions and that these
matters are documented in the minutes.
(2) Develop a policy on the remuneration and other incentives for directors20. This
policy shall be submitted for approval by the stakeholders of a cooperative OPS.
The board shall ensure that the policy is aligned with the OPS’ long-term
business interests and that the policy neither compromises the OPS’ safety and
efficiency objectives nor conflicts with the directors’ fiduciary responsibilities.
(3) Conduct and maintain the affairs of the OPS within the scope of its authority,
in accordance with the OPS’ Articles of Incorporation or Articles of Cooperation,
as applicable, and as prescribed in existing laws, rules, and regulations.
(4) Maintain and periodically update, organizational rules, by-laws. or other similar
documents setting out the organization of the board, its rights. responsibilities,
and key activities. The board shall ensure that there is clear delineation of the
lines of responsibility and accountability.
(5) Oversee the development of governance arrangements, approve such
arrangements, and monitor the implementation of the same. These
arrangements shall be embodied in the governance policies which shall be
periodically reviewed. The board shall ensure that the arrangements are
observed accordingly.
(6) Approve a policy on RPTs to ensure that these transactions are conducted on
an arm’s length basis and relevant stakeholders’ interests are protected. The
board shall ensure applicable laws, rules, and regulations are complied with.
(7) Adopt guidelines for identifying, addressing, and managing conflict of interests
stemming from board actions or decisions that involve beneficial and/or
pecuniary interest of a member or his related interests.

d. The board of directors shall be responsible for approving the OPS’ risk governance
framework and ensure the implementation of this framework. In particular, it shall:
(1) Approve policies for setting risk tolerance, defining risk appetite, and
addressing crises that could threaten the viability of the payment system which
the OPS operates. In pursuing so, the board shall take into account the OPS’
safety and efficiency objectives, business environment, regulatory landscape,
long-term business interests, and risk management capability.
(2) Oversee the development of a risk appetite statement (RAS) and approve the
same. The board shall ensure adherence to the statement, as well as
compliance with risk limits and other risk management policies throughout
the organization.
(3) Assign responsibilities and accountability for decisions that have a significant
impact on the overall risk profile of the OPS, by adopting the three lines of
defense framework. The business line functions will represent the first line of
defense, the risk management and compliance functions as the second line of
defense, and the internal audit function as the final line of defense.

In this regard, the board of directors shall ensure that the risk management,
compliance, and internal audit functions have proper stature in the
organization and have adequate staff and resources. The stature of these

20
R.A. No. 9520 provides that compensation of directors. shall be fixed in its by-laws and that in the absence of any
provision on the same, directors shall not receive any compensation except for reasonable per diems.
32
 functions in the organization must enable them to carry out their
responsibilities independently, objectively, and effectively.

e. The board shall ensure the OPS’ compliance with all supervisory and regulatory
requirements. In relation to this, it shall establish an effective compliance risk
management system that shall identify and mitigate risks arising from the OPS’
failure to comply with applicable laws, Bangko Sentral regulations, standards
prescribed by the relevant payment system management body, and codes of
conduct applicable to OPS’ activities.

f. The board shall ensure that the OPS’ business model, strategies, and activities
appropriately take into account the legitimate interests of its participants and
other relevant stakeholders. In this regard, it shall:
(1) Consider the welfare of participants and relevant stakeholders in crafting major
operational decisions involving the payment system’s design and overall
business strategies. These decisions may involve the OPS operating structure,
the scope of transactions processed, and the critical technology used in
operations; and
(2) Establish clear processes for identifying and addressing stakeholders’ concerns
and any conflict of interests between the stakeholders and the OPS.

Specific Duties and Responsibilities of a director. The position of a director is a

position of trust which assumes fiduciary responsibilities for different stakeholders of
the payment system. Hence, the members of the board of directors should exercise
their “duty of care” and “duty of loyalty” to the OPS.

a. To remain fit and proper for the position for the duration of his term . A director
should possess unquestionable credibility to make decisions objectively and resist
undue influence. He shall treat board directorship as a profession and shall have a
clear understanding of his duties and responsibilities as well as his role in
promoting good governance. Hence, he shall maintain his professional integrity
and continuously seek to enhance his skills and knowledge through continuing
education, training, and other learning opportunities. He should also have
adequate understanding of the activities of the OPS, as well as the developments
in the national payment system, the financial markets, and the broader financial
system that may have implications for the safety and efficiency of the payment
system where the OPS operates.

b. To act honestly and in good faith, with loyalty and in the best interest of the OPS,
its stockholders, and other stakeholders such as the end-users of the payment
system and the general public. A director must always act in good faith, with the
care which a prudent man would exercise under similar circumstances. While a
director should always strive to promote the interest of all stockholders, he should
also give due regard to the rights and interests of other stakeholders.

c. To have a working knowledge of the statutory and regulatory requirements

affecting the institution. A director should be knowledgeable of the regulations of
the Bangko Sentral, the provisions of the NPSA, and where applicable, the
requirements of other relevant regulatory agencies. A director should also keep
himself informed of financial system developments and payment system trends
and relevant international standards in order to safeguard the interest of the OPS.

In addition, a director of an OPS shall have the duties and responsibilities of a director
33
enumerated as items “b”, “d”, “e”, “f”, “g”, and “i” in Sections 132/132-Q of the
MORB/MORNBFI (Specific duties and responsibilities of a director).

401.6 Board-Level Committees. The board of directors may delegate some of its
functions, but not its responsibilities, to board-level committees. In this regard, the
board shall:

a. Approve, review, and update at least annually or whenever there are significant
changes to the charter of each committee or other governance arrangements that
set out a committee’s mandate, scope of function, and working arrangements.
These arrangements shall articulate how the committee will report to the board of
directors, what the committee members are expected to deliver, and how long a
member may serve the committee. The board shall also consider occasional
rotation of committee members and chairs to avoid undue concentration of power
and promote fresh perspective.

b. Appoint members of the committees, considering the optimal mix of skills and
experiences to allow the board of directors, through the committees, to fully
understand and objectively evaluate relevant issues. To promote objectivity, the
board shall appoint independent directors and non-executive members of the
board. Towards this end, an independent director who is a member of any
committee that exercises executive or management functions which can
potentially impair such director’s independence cannot accept membership in
committees that perform independent oversight/control functions such as the
Audit, Risk Oversight, or Corporate Governance Committee without prior approval
of the Monetary Board.

In the case of a cooperative, the Audit Committee members that meet the
qualifications stated in this policy shall be elected by the cooperative’s General
Assembly pursuant to R.A. No. 9520.

c. Ensure that each committee maintains appropriate records (e.g., minutes of

meetings or summary of matters reviewed and decisions taken) of their
deliberations and decisions. Such records shall document the committee’s
fulfillment of its responsibilities and facilitate the assessment of the performance
of the committee’s functions.

d. Form an Audit Committee unless directed by the Bangko Sentral to create other
board-level committees (i.e., Risk Oversight or Corporate Governance Committee)
such as the case for Operators of Designated Payment Systems (ODPS) under
Section 401.10. Provided, that the board of directors shall discuss risk management
and corporate governance matters in its meetings, with the views of the
independent director/s, in addition to those of the other directors, duly considered
and minuted.

In complying with this provision, OPS that are branches or locally incorporated
subsidiaries of foreign incorporated OPS may resort to the global or regional board-
level committees formed by their Head Office or Parent Company. Hence, these OPS
need not form their own local board and board-level committees to comply with this
provision. However, depending on the nature, scale and complexity of their local
businesses they may be required by the Bangko Sentral to form local management
committees to oversee risk management, internal control, compliance and strategic
34
concerns emanating from their local operations.

Audit Committee

a. Composition and chairperson. The audit committee of an OPS shall be composed

of at least three (3) members of the board of directors who shall all be non-
executive directors. including the chairperson who shall be an independent
director. The chairperson of the audit committee shall not be the chairperson of
the board of directors or of any other board-level committee.

The audit committee shall have expertise in payment system operations, internal
control frameworks, accounting, auditing, or related financial management
expertise or relevant experiences commensurate with the size, systemic
importance, operational complexity, and risk profile of the OPS. The committee
shall have access to independent experts who can assist in carrying out the
committee’s responsibilities.

b. Duties and responsibilities of the audit committee. The audit committee shall:
(1) Oversee the operational and financial reporting framework. The committee
shall oversee the operational and financial reporting processes, practices, and
controls. It shall ensure that the reporting framework enables the generation
and preparation of accurate and comprehensive information and reports.
(2) Oversee the internal audit function. The committee shall be responsible for the
appointment/selection, performance evaluation, remuneration, and dismissal
of internal auditors. It shall review and approve the audit scope and frequency
and shall ensure that the scope covers the review of the effectiveness and
adequacy of the OPS’ internal controls and risk management system. To ensure
the effectiveness of the internal audit function, the committee shall deploy
sufficient audit human resource and accord the auditors the independence
necessary to enable them to provide rigorous assessment on the quality of risk
management and control processes. The committee shall functionally meet
with the head of the internal audit function, or with equivalent personnel in
case the internal audit function is outsourced, and their meetings shall be duly
minuted and adequately documented.
(3) Oversee the external audit function. The committee shall be responsible for the
appointment, performance evaluation, and replacement of the external
auditor, including approval of fees to this auditor. It shall review and approve
the audit engagement contract and ensure that the audit, at a minimum,
covers the areas which are specifically prescribed by the Bangko Sentral and
other regulators.
(4) Establish whistleblowing mechanism. The committee shall establish and
maintain mechanisms by which officers and staff shall, in confidence, raise
concerns to persons or entities that have the power to take corrective actions
on possible improprieties or malpractices in the areas of payment system
operations, financial reporting, internal control, and audit, or other issues. The
committee shall also ensure that arrangements are in place for the
independent investigation, appropriate follow-up action, and subsequent
resolution of complaints.

Other responsibilities of the audit committee set forth under items “b(2)”, “b(5)” and
“b(6)” of Sections 133/133-Q of the MORB/MORNBFI (Audit Committee), shall
likewise apply.

35
Risk Oversight Committee.

The provisions pertaining to the composition, chairperson, and duties and

responsibilities of the Risk Oversight Committee under Sections 133/133-Q of the
MORB/MORNBFI (Risk Oversight Committee) shall apply.

Corporate Governance Committee.

a. Composition. The provisions pertaining to the composition of the Corporate

Governance Committee under Section 133 of the MORB and Section 133-Q of the
MORNBFI shall apply.

b. Duties and responsibilities of the corporate governance committee

(1) Duties of the corporate governance committee pertaining to the oversight of

the nomination process for members of the board of directors and for positions
appointed by the board; and the oversight of the evaluation process on the
performance of the board and members of senior management under items
“b(1)” and “b(3)” of Sections 133/133-Q of the MORB/MORNBFI (Corporate
Governance Committee) shall apply.
(2) Oversee the continuing education program for the board of directors. The
committee shall ensure allocation of sufficient time, budget, and other
resources for the continuing education of directors, and draw on external
expertise as needed.

The committee shall establish and ensure effective implementation of the

policy on onboarding/orientation for first time directors and on the annual
continuing education for all directors. For this purpose, the first-time directors
shall undergo a minimum of 8-hour orientation program subject to exemptions
provided under item “a (2)” of Sections 132/132-Q of the MORB/MORNBFI
(Qualifications of a director), while all directors shall take a minimum of 4-hour
annual continuing training. The training programs should cover topics relevant
in carrying out their duties and responsibilities as directors, including strategic
management, payment system and financial market concepts, risk
management techniques, and internal control frameworks.
(3) Oversee the design and operation of the remuneration and other incentives
policy. The committee shall ensure that the remuneration and other incentives
policy is aligned with the operating and risk culture, as well as with the strategic
and financial interest of the OPS. This policy shall preserve the interest of the
payment system where the OPS operates, and comply with legal and
regulatory requirements.

Moreover, the committee shall monitor and conduct a periodic review of the
remuneration and other incentives policy to ensure that this policy operates and
achieves the objectives as intended.

401.7 Officers. Sections 401.7 and 401.8 shall apply to all OPS.

Qualifications of an officer. An officer must be fit and proper for the position he is
being appointed to. In determining whether a person is fit and proper for a particular
position, the following matters must be considered: integrity/probity, education/
training, and relevant competencies such as knowledge, experience, skills, and
diligence that are necessary in the effective and efficient discharge of the
36
responsibilities of the position.

In assessing an officer’s integrity/ probity, consideration shall be given to the officer’s

market reputation, observed conduct and behavior, as well as his ability to
continuously comply with company policies, clearing and settlement rules, and
applicable laws and regulations, including payment system rules and standards
adopted by a relevant payment system management body, regulatory body,
professional organization, or the government in general and any of its
instrumentalities/agencies.

An appointed officer has the burden to prove that he possesses all the foregoing
minimum qualifications and none of the cases mentioned under Section 401.8
(Persons disqualified to become directors/officers).

The foregoing qualifications for officers shall be in addition to those required or

prescribed under other applicable laws and regulations.

Duties and responsibilities of officers.

The provisions of Sections 134/134-Q of the MORB/MORNBFI (Duties and

responsibilities of officers), shall apply to the extent that these guidelines are
appropriate for officers handling the business of an OPS.

Chief Executive officer (CEO). The CEO shall be the overall-in-charge for the
management of the OPS businesses and affairs which are governed by the strategic
direction and risk appetite approved by the board of directors. He shall be primarily
accountable to the board of directors for championing the desired conduct and
behavior, implementing strategies while ensuring the payment system’s safety,
efficiency, and reliability, and promoting both long-term business and stakeholder
interests.

401.8 Disqualification of Directors and Officers. The Bangko Sentral recognizes that
the fitness and propriety of the board of directors and management significantly
influence the quality of governance over an OPS. In addition to the standards set forth
on the qualifications and responsibilities of the board and management, this Section
provides the rules governing the watchlisting and disqualification of persons from
becoming directors/officers of an OPS. This policy aims to further promote the
integrity of the payment system and better protect the interest of the payment system
participants and the public.

Persons disqualified to become directors/officers. Without prejudice to specific

provisions of the law prescribing disqualifications for directors/trustees, the following
persons are disqualified from becoming directors:

a. Permanently disqualified

(1) Persons who have been convicted by final judgment of the court for willful
violation of payment system laws, rules, and regulations; and

(2) Persons who were found culpable for the closure of an operator of a payment
system, as determined by the Monetary Board;

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 Items “a. numbers (1)-(7)” under Sections 138/137-Q of the MORB/MORNBFI (Persons
disqualified to become directors–- Permanently Disqualified) shall hereby apply to
the grounds for permanent disqualification of directors and officers of an OPS.

b. Temporarily disqualified

(1) Persons who have shown unwillingness to settle their financial obligations, as
evidenced by, but not limited to, the following circumstances:

(a) the person has failed to satisfy any financial obligation that has been
adjudicated by a court;

(b) the person has filed for insolvency or payment suspension that adversely
affects his/her fitness and propriety as director/officer; or

(c) a person who is delinquent in the payment of: an obligation with a bank
that functions as an OPS where he/she is a director or officer; or at least two
(2) obligations with other banks/FIs.

Financial obligations as herein contemplated shall include all forms of

borrowings mentioned under item “b. (3.b)” of Section 138/137-Q of the
MORB/MORNBFI (Persons disqualified to become directors – Temporarily
disqualified). Directors/officers concerned shall remain temporarily
disqualified until the financial obligations have been settled or satisfied.

(2) Persons involved in the closure of an OPS pending their clearance by the
Monetary Board;

(3) Persons confirmed by the Monetary Board to have committed acts or

omissions, which include failure to observe/discharge their duties and
responsibilities prescribed under existing regulations, resulting in: (a) undue
injury or disadvantage to the OPS through manifest partiality, evident bad faith,
or gross inexcusable negligence; (b) material loss or potential damage to the
payment system, OPS, participants, stakeholders, the Bangko Sentral, or the
public in general; or (c) a significant threat to the safety, efficiency, and
reliability of the payment system;

(4) Persons found to have been involved in any irregularity/violation which

constitutes a just cause for dismissal/termination as defined under the Labor
Code of the Philippines, as amended, regardless of any action taken by the OPS;

(5) Persons with cases pending before a court or other tribunal, or those convicted
by said court or tribunal or those convicted by said court or tribunal but whose
conviction has not become final and executory, for offenses involving: (a)
dishonesty or breach of trust such as, but not limited to, estafa, embezzlement,
extortion, forgery, malversation, swindling, theft, robbery, falsification, bribery,
violation of B.P. Blg. 22 (Anti-Bouncing Check Law), violation of R.A. No. 3019
(Anti-Graft and Corrupt Practices Act), violation of R.A. No. 9160, as amended
(Anti-Money Laundering Act), and prohibited acts and transactions under
Section 7 of R.A. No. 6713 (Code of Conduct and Ethical Standards for Public
Officials and Employees); or (b) violation of securities, banking or payment
system laws, rules, and regulations;

38
 (6) Persons who are engaged in a business that is the same or similar to that of the
OPS;

(7) Persons who in any way possess a conflict of interest with the OPS, including
but not limited to, for a clearing switch operator (CSO) that provides clearing
services to any of the automated clearing houses (ACHs) established under the
governance of a Bangko Sentral accredited payment system management
body (PSMB) under the National Retail Payment System (NRPS) framework,
persons who are directors of such PSMB and of such CSO’s critical service
provider/s (CSP), as defined under the Payment System Oversight Framework.

In this regard, a director of a PSMB, shall likewise be temporarily disqualified as

a director of a CSP of the CSO to an ACH that is governed by such PSMB.

Item “b. numbers (5), (6), and (8)-(12)” under Sections 138/137-Q of the MORB/MORNBFI
(Persons disqualified to become directors - Temporarily disqualified) shall hereby
apply to the grounds for temporary disqualification of directors and officers of an OPS.

Resignation or retirement from his/her office shall not exempt the person from being
permanently or temporarily disqualified under this Section.

Persons prohibited to become officers

a. The spouses or relatives within the second degree of consanguinity or affinity

holding officership positions across the following functional categories within an
OPS:
(1) Decision making and senior management function, e.g., president, chief
executive officer (CEO), chief operating officer (COO), general manager, and
chief financial officer (CFO);
(2) Recordkeeping and financial reporting functions, e.g., controller and chief
accountant;
(3) Safekeeping of assets, e.g., personnel handling cash receipts and
disbursements;
(4) Risk management function, e.g., chief risk officer;
(5) Compliance function, e.g., compliance officer; and
(6) Internal audit function, e.g., internal auditor.

b. Persons who are engaged in a business that is the same or similar to that of the
OPS;

c. Persons who in any way possess a conflict of interest with the OPS; and

d. Owing to their official government responsibilities, any appointive or elective

government official, whether full time or part time.

Effect of non-possession of qualifications or possession of disqualifications. An

elected/appointed director/officer of an ODPS, not possessing all the qualifications
mentioned under Section 401.4 and Section 401.7, and/or has any of the
disqualifications mentioned under Section 401.8 shall not be confirmed by the
confirming authority of the Bangko Sentral and shall be removed from office even if
he/she has assumed the position to which he/she was elected or appointed pursuant
to Section 6(d)(3) of the NPSA. A confirmed director/officer or a director/officer not

39
requiring confirmation found to possess any of the disqualifications, shall be subject
to the following disqualification procedures.

Disqualification procedures. A director/officer who is considered disqualified under

this Section shall be subject to the disqualification procedures provided herein.
Disqualified persons shall be included in the Bangko Sentral Watchlist Files.

a. An OPS shall be responsible for determining the existence of the ground for
disqualification of the person concerned and for reporting the same to the
appropriate oversight department of the Bangko Sentral within ten (10) calendar
days from knowledge thereof. The OPS shall ensure that the person concerned is
informed that his/her offense was reported to the appropriate oversight
department of the Bangko Sentral and as such, may be evaluated for watchlisting.
The OPS shall conduct its own investigation, impose sanction/s if appropriate, and
report the results of the actions taken to the appropriate oversight department of
the Bangko Sentral within twenty (20) calendar days from the termination of
investigation.

This shall be without prejudice to the authority of the Monetary Board to disqualify
a person from being elected/appointed as director/officer in any Bangko Sentral­
supervised institution, based on information on the existence of any ground for
disqualification gathered or obtained from the Bangko Sentral, domestic financial
regulatory authorities, financial intelligence units, and similar agencies or
authorities of foreign countries, the courts and other quasi-judicial bodies, and
other government agencies or the public.

b. On the basis of knowledge and evidence on the existence of any of the grounds for
disqualification mentioned in this Section, the appropriate oversight department
of the Bangko Sentral shall notify in writing the person concerned, by personal
service, electronic mail, registered mail, or courier with registry return receipt card
at his/her last known address, of the existence of the ground for his/her
disqualification. The person shall be allowed to submit within fifteen (15) calendar
days from receipt of such notice a sworn statement/explanation on why he/she
should not be disqualified and why his/her name should not be included in the
watchlist file, as provided in this Section. The person shall submit the sworn
statement/explanation together with a document supporting his/her position. The
head of said appropriate oversight department of the Bangko Sentral may allow
an extension on meritorious ground.

c. Upon receipt of the reply/explanation of the person concerned, the appropriate

oversight department of the Bangko Sentral shall proceed to evaluate the case.

d. The failure of the person to reply within the period provided under Item “b" of this
Section (Disqualification Procedures) shall be deemed a waiver of opportunity to
explain and the appropriate oversight department of the Bangko Sentral shall
proceed to evaluate the case based on the available records/evidence.

e. Upon evaluation of the appropriate oversight department of the Bangko Sentral

that a person is disqualified under any of the grounds listed in this Section, said
Bangko Sentral department shall elevate to the Monetary Board the person's
disqualification and inclusion in the Bangko Sentral Watchlist Files for approval.

f. Upon approval by the Monetary Board, the appropriate oversight department of

40
 the Bangko Sentral shall inform in writing the concerned person, by personal
service, electronic mail, registered mail or courier, at his/her last known address, of
his/her disqualification from being elected/appointed as director/officer in any
Bangko Sentral-supervised institution and his/her inclusion in the masterlist of
watchlisted persons.

g. The determination of the Monetary Board shall become final and executory within
fifteen (15) calendar days from the receipt of the resolution by the concerned
directors or officers, unless a motion for reconsideration has been filed.

h. In case the subject of disqualification is an incumbent director/officer, the board

of directors of the OPS concerned shall be immediately informed of such
disqualification approved by the Monetary Board and shall be directed to act
thereon not later than the following board meeting. Within three (3) business days
after the board meeting, the corporate secretary shall report to the appropriate
oversight department of the Bangko Sentral the action taken by the board on the
person involved.

i. In cases which are initiated by the Bangko Sentral and which resulted in conviction
by final judgment of a court for violation of payment system laws, rules, or
regulations, the Office of the General Counsel and Legal Services (OGCLS) shall
recommend to the Monetary Board, the permanent disqualification of said person
and his/her name shall be included in the Disqualification File “A" (Permanent)
upon approval of the Monetary Board.

In administrative complaints against directors and officers filed with the Bangko
Sentral, resulting in the imposition of administrative penalties for violation of
payment system laws, rules, or regulations, the OGCLS shall recommend to the
Monetary Board, the disqualification of said person, if warranted, according to the
severity of the offense, and his/her name shall be included in the Disqualification
File “A” (Permanent) or “B” (Temporary), as the case may be, upon approval by the
Monetary Board.

Watchlist Files, and Procedures for Delisting and Reclassification

The guidelines governing the Bangko Sentral Watchlist files and the delisting and
reclassification procedures for disqualified directors and officers under Section
138/137-Q of the MORB/MORNBFI (Watchlist files; Delisting/Reclassification) shall
apply herewith.

Confidentiality

Watchlist files shall be for the internal use of the Bangko Sentral only. Provided, That
upon authority of the person/s concerned, an OPS can gain access to information in
said watchlist files, among other Bangko Sentral records, by using the prescribed form
in Appendix 401-3 only for the purpose of screening the nominees/applicants for
director/officer positions.

401.9 Governance Policy for other OPS. The following guidelines shall apply to OPS
that are organized either as a sole proprietorship or a partnership:

41
Qualifications as to the fitness and propriety of owners and officers. The individuals
that own and/or manage the OPS shall possess and display the following
characteristics:

a. Probity, honesty, integrity, and good reputation

Individual owners and officers shall conduct business with diligence, fairness, and
in accordance with sound ethical business practices. They shall not possess or be
charged with any of the grounds for disqualifications for directors and officers of
an OPS, under Section 401.8 (Disqualification of Directors and Officers).

b. Competence and professional capability

Individual owners and officers shall have:

(1) Adequate relevant knowledge of the structure, risks, and purpose of the
products and services associated with their business activities;
(2) Sufficient work/business experiences and proficient understanding of the
technical requirement of payment system operations; and
(3) Capability to comply with relevant laws, rules, and regulations governing the
OPS.

c. Financial soundness and capacity

Individual owners and officers shall be capable of ensuring that the OPS can
extinguish its liabilities when they come due. They shall manage their financial
affairs in a prudent manner to mitigate the financial risks that are associated with
the business of the OPS.

These required credentials of owners and officers are intended to ensure that the
persons managing the OPS are equipped with technical knowledge, financial
management know how, and relevant competencies, which are necessary for
protecting the interest of the OPS’ stakeholders and safeguarding the welfare of the
payment system in general.

Officers of an OPS that is organized as a sole proprietorship or a partnership shall be

covered by:
a. the provisions on the duties and responsibilities of officers under Section 401.7
(Officers), and
b. the grounds for disqualification and the disqualification procedures for officers of
an OPS under Section 401.8 (Disqualification of Directors and Officers).

Minimum Prudential Requirements. At a minimum, an OPS which is organized as a

sole proprietorship or a partnership, shall institute sound governance, risk
management, internal control, and compliance functions in conducting the business
affairs of the OPS.

a. Governance

The individual owners and officers shall demonstrate sound management

practices appropriate to the size, risk profile and operational complexity of their
OPS business. These practices shall be observed through:
(1) active oversight of the business operations, performance, risk exposures, and
42
 regulatory compliance of the OPS;
(2) adoption of appropriate policies and procedures governing key business
activities and control functions;
(3) establishment of effective risk monitoring and management information
systems; and
(4) maintenance of a sound internal control environment that is supported by
effective internal audit and compliance programs.

b. Risk Management

The individual owners and officers shall set up commensurate risk management
systems to identify, measure, evaluate, report, and control material risks on a timely
basis and assess adequacy of resources in relation to their risk profile. Appropriate
risk management procedures should be deployed to aid in effectively addressing
threats and/or risks to the safety, efficiency, and reliability of payments transacted
through the OPS.

c. Internal Controls

The individual owners and officers shall establish an effective and adequate system
of internal controls in conducting their business. Internal control measures in place
shall, at a minimum, encompass the following elements:

(1) Sound organizational structures that address appropriate segregation of duties

and proper reporting lines among business owners, officers, and employees;
(2) Accounting policies and processes that incorporate checks and balances, and
separation of financial records between those of the OPS and those of the
owners to ensure integrity of financial reports and key business processes;
(3) Safeguarding of assets;
(4) Subjecting business activities and processes to an independent internal audit
to determine whether business objectives are being met and internal controls
are functioning as intended; and
(5) Engaging a Bangko Sentral-accredited external auditor to conduct an external
audit of the financial statements of the OPS on an annual basis for a maximum
period of two (2) years. The OPS may re-engage an external auditor after two (2)
years from the latest audit conducted by the auditor.

d. Compliance System

The individual owners and officers shall devise a compliance system that is
commensurate to the size, risk profile, and operational complexity of the OPS. The
system shall be designed to specifically identify and mitigate business risks that
may erode the franchise value of the OPS. In the context of this policy, business risk
refers to conditions that may be detrimental to the institution's business model
and its ability to generate income from operations. These risks include compliance,
market conduct, legal, and reputational risks.

As part of the OPS compliance system, the individual owners and officers shall
adopt adequate compliance policies and procedures that govern the conduct of
robust compliance monitoring, testing, and review of business operations to assess
adherence of the OPS to payment system laws, Bangko Sentral regulations,
43
 payment system management body rules and standards, and other pertinent rules
or regulations.

401.10 Governance Requirements applicable to Operators of a Designated Payment

System (ODPS). The following policy guidelines shall apply to operators of a payment
system that has been designated by the Bangko Sentral:

a. Non-executive directors, who shall include independent directors, shall comprise

the majority of the board of directors of an ODPS;

b. Independent directors of an ODPS shall represent at least one third (1/3) of the
members of the board but in no case shall be less than two (2). Provided, that any
fractional result from applying the minimum proportion, (i.e., 1/3) shall be rounded
up to the nearest whole number; and

c. The board of directors of an ODPS shall constitute, at a minimum, the following

committees: (1) Audit Committee; (2) Risk Oversight Committee, and (3) Corporate
Governance Committee;

The Audit, Risk Oversight and Corporate Governance committees of an ODPS shall
be composed of at least three (3) members of the board of directors, who shall all
be non-executive directors, majority of whom shall be independent directors,
including the chairperson.

401.11 Confirmation of the Election/Appointment of Directors/Officers; Bio-Data of

Directors and Officers

Confirmation of election/appointment of directors/officers.

Elected or appointed directors and key officers of an ODPS shall be subject to

confirmation by the Bangko Sentral. Provided, that the election/appointment of a
director or officer of an ODPS shall not be subject to confirmation by the Bangko
Sentral if his election/appointment as such in another BSFI has been previously
confirmed by the Bangko Sentral.

Confirming authority. The election/appointment of directors/officers shall be subject

to the confirmation by the following:

Confirming Authority Position Level

a. Monetary Board Directors and CEOs of ODPS
b. Payments and Currency Management Heads of internal audit, risk management
Sector (PCMS) Committee and compliance functions, and other
officers with rank of senior vice-president
and above (or equivalent ranks) of an
ODPS

Provided, That an ODPS shall report to the appropriate oversight department of the
Bangko Sentral, any succeeding resignation, retirement, or replacement of the
abovementioned directors/officers, within twenty (20) business days after such
resignation/retirement.

44
The election/appointment of abovementioned directors/ officers shall be deemed to
have been confirmed by the Bangko Sentral, if after sixty (60) business days, the
appropriate oversight department of the Bangko Sentral does not advise the ODPS
concerned against said election/appointment.

However, the confirmation by the Monetary Board or by the PCMS Committee of the
election/appointment to the abovementioned position levels shall not be required in
the following cases:
a. Re-election of a director (as a director) in the same ODPS or election of the same
director in another ODPS;
b. Re-election of an independent director (as an independent director or not) in
another ODPS; and
c. Promotion of an officer, other than to that which requires (a) prior Monetary Board
approval or (b) a different set of minimum qualifications, or (c) a different level of
confirming authority as provided in the first paragraph hereof, in the same ODPS
or appointment or transfer of the concerned officer to another ODPS.

The said exemptions shall apply provided that: (i) the director/officer concerned has
been previously confirmed by the Bangko Sentral, or (ii) his/her
election/promotion/transfer requires the same level of confirming authority
mentioned in this Section. These exemptions shall apply to directors/officers
confirmed by the Monetary Board or by the PCMS Committee starting 1 July 2022.

Provided further, that for re-elections, promotions and appointments which are
exempted from Bangko Sentral confirmation under this Section, an ODPS shall
submit to the Bangko Sentral an authorization form for querying its watchlist files (see
Appendix 401-3) and ascertain that there is no outstanding derogatory information on
the concerned director/officer since his/her last appointment/election.

The appointment of officers below the rank of senior vice-president, other than the
heads of internal audit, risk management and compliance functions regardless of rank
shall not be subject to Bangko Sentral confirmation.

Documentary Requirements

a. The complete list of the required certifications and other documentary proof of
qualifications for the confirmation of the election/appointment of
directors/officers are shown in Appendix 401-1.

In this regard, an ODPS shall submit the documents listed in Appendix 401-1, to the
appropriate oversight department of the Bangko Sentral within twenty (20)
business days from the date of election/re-election/appointment of the directors
or from the date of the meeting of the board of directors in which the officers are
appointed/promoted.

Non-submission of complete documentary requirements within the prescribed

period shall be construed as failure to establish qualifications for the position.

A director/officer whose election/appointment was not confirmed for failure to

submit the complete documentary requirements shall be deemed removed from
office upon the Bangko Sentral’s issuance of due notice to the board of directors of
the ODPS, even if he/she has assumed the position to which he/she was
elected/appointed, pursuant to Section 6 (d)(3) of the NPSA.
45
b. In cases of change of name due to change in civil status and change of residential
address of a director or officer whose election/appointment is subject to Bangko
Sentral confirmation, the ODPS shall submit to the appropriate oversight
department of the Bangko Sentral their updated bio-data within twenty (20)
business days from the date the change has occurred.

c. All OPS shall submit to the appropriate oversight department of the Bangko
Sentral, a duly notarized list of the incumbent members of the board of directors
and officers (president or equivalent rank down the line, format attached as
Appendix 401-2), within twenty (20) business days from the annual election of the
board of directors as provided in the OPS’ by-laws.

d. The ODPS shall not be required to submit their bio-data to the Bangko Sentral for
appointment of other officers below the rank of SVP other than the heads of
internal audit, risk management, and compliance functions regardless of rank.

All OPS, however, shall maintain a complete record of the bio-data of all their
directors and officers and shall be made available during on-site examination or
when required by the Bangko Sentral for submission for off-site verification.

If after evaluation, the appropriate oversight department of the Bangko Sentral

finds grounds for disqualification, the director/officer so elected/re­
elected/appointed/promoted may be recommended for removal from office even
if he/she has assumed the position to which he/she was elected/re­
elected/appointed/promoted pursuant to Section 6 (d)(3) of the NPSA. In the
aforementioned case, all actions or decisions executed by the officer/director
removed from office prior to receipt of the Bangko Sentral’s notice shall be valid
and binding “de facto”. The effect of Bangko Sentral’s issuance of notice of the
removal of such officer/director shall take effect upon receipt of the OPS of such
notice.

401.12 Enforcement Action. Enforcement Action under Subsection 401.12 was

transferred to Part 15 of the Manual.

(Circular No. 1127 dated 17 September 2021)

46
 PART FIVE
LICENSING AND REGISTRATION

501 ELECTRONIC PAYMENT AND FINANCIAL SERVICES

501.1 Policy Statement. The Bangko Sentral recognizes that electronic payment and
financial services contribute to economic growth by facilitating the transfer of funds
which are necessary for all productive activities. Thus, the Bangko Sentral promotes a
safe, efficient, reliable, affordable, and inclusive national payment system to support
the delivery of said services.

501.2 Classification of EPFS. For the purpose of authorizing BSFIs to render EPFS, such
services shall be classified as follows:
a. Basic EPFS - These are limited to services allowing only receipt of funds or access
to information (e.g., account balance, statement of account, etc.).
b. Advanced EPFS - In addition to basic services, advanced EPFS enable customers
to send funds and initiate other financial transactions.

501.3 Requirements for the Grant of Authority to Offer EPFS25. Pursuant to Section 111
of the MORB on the Bangko Sentral Policy and Regulations on Licensing, BSFIs that
intend to offer EPFS shall obtain the appropriate authority/license, as follows:

Classification Category of License/Authority

Advanced EPFS Type A26/B27
Basic EPFS Type C

BSFIs shall observe the “Guidelines on Licensing of Electronic Payment and Financial
Services” shown in Appendix 501-1.

501.4 Compliance with Relevant Regulations. A BSFI that has been granted an
advanced EPFS authority shall at all times comply with the following relevant
regulations:

25 The BSFIsshallre‐registertheir EPFS by accomplishing the re‐registration form with covering

certification (Annex B of Appendix 136). The re‐registration form shall be electronically submitted
with the subject “"EPFS Re‐registration‐‐" to epfs‐licensing@bsp.gov.ph not later than 31 March 2019
while the covering certification shall be sent to the Financial Technology Sub‐sector of the Bangko
Sentral. Failure to submit the re‐registration form by 31 March 2019 shall result in the revocation of
the issued license/s.
26
This applies to BSFIs that can be assessed against the prudential criteria provided in the Policy and Regulations
on Licensing. These applicants must have been examined by the Bangko Sentral.
27
This applies to proponents that cannot be assessed against the prudential criteria provided in the Policy and
Regulations on Licensing. These include newly-established BSFIs and new applicants for an authority to operate as
“Electronic Money Issuer-Others”.

47
a. Oversee its EPFS through an appropriate top-level committee to ensure that
concerns on these services are timely and properly addressed;

b. Make its EPFS with funds transfer functionality interoperable by participating in

an Automated Clearing House;

c. Integrate EPFS in its overall strategic plan to ensure that these services do not put
undue strain on its systems, financial performance, and risk management
capability;

d. Promote EPFS by implementing appropriate marketing strategies;

e. Ensure that it satisfies the legal and regulatory requirements for Anti-Money
Laundering/Combating Financing of Terrorism; and

f. Comply with the relevant regulations on payments, Information Technology (IT)

Risk Management Standards, Guidelines on Electronic Products and Services,
Business Continuity Management regulations, and Consumer Protection
Standards of Conduct for BSFIs.

501.5 Enhancements and other Changes in EPFS. BSFIs shall seek prior Bangko Sentral
approval for the following enhancements and changes in their licensed EPFS:
a. Replacement of platform;
b. Upgrade in EPFS from purely informational to transactional services; and
c. Change in system architecture, altering the risk score or assessment on the system
or the other systems related to it.

501.6 Reportorial requirements. BSFIs shall provide the Bangko Sentral with the required
data and updates on their EPFS.

a. Required Reports. The following reports shall be submitted to the appropriate

supervising department of the Bangko Sentral in the manner prescribed under
Appendix 501-1:
(1) EPFS Transactions and Indicators; and
(2) Changes and Enhancements in EPFS.

b. Sanctions. Failure to comply with the reportorial requirements shall subject the
concerned BSFI to applicable sanctions for “Erroneous/Delayed/Erroneous and
Delayed/Unsubmitted reports” as prescribed under Part 1 of the MORPS.

501.7 Enforcement actions. Enforcement Action under Subsection 101.6 was

transferred to Part 15 of the Manual.

(Circular No. 1033 dated 22 February 2019)

48
 502 RULES AND REGULATIONS ON THE REGISTRATION OF OPERATORS
OF PAYMENT SYSTEMS

502.1 Policy Statement. The Bangko Sentral recognizes the crucial role of
payment systems in maintaining a stable financial system and facilitating the
realization of monetary policy objectives. It is thus important for the operation
of payment systems to be safe, efficient and reliable.

502.2 Coverage. All OPS as defined under R.A. No. 11127 and clarified in this
Section shall register with the Bangko Sentral. For this purpose, an OPS shall be
a person that performs any of the following functions:
a. Maintains the platform that enables payments or fund transfers, regardless
of whether the source and destination accounts are maintained with the
same or different institutions;
b. Operates the system or network that enables payments or fund transfers to
be made through the use of a payment instrument;
c. Provides a system that processes payments on behalf of any person or the
government; and
d. Such other activities similar to the foregoing, as may be determined by the
Monetary Board.

The examples of activities performed by an OPS under the functions set forth
above are found in Appendix 502-1.

502.3 Requirements for Registration. The following rules shall apply to the
registration of an OPS pursuant to Section 10 of R.A. No. 11127.

OPS that have yet to commence operations. The following requirements shall
apply to an OPS that have yet to commence operations:

a. Application for Registration. An OPS shall submit the following documents

and information to the appropriate department of the Bangko Sentral:
(1) Duly accomplished Application for Registration (Appendix 502-2 signed
by the president, chief executive officer, or a senior officer holding an
equivalent position;
(2) Business Plan, which includes the description of its existing business,
business model and target markets; and
(3) Copy of the business registration/permit indicating the line of business of
the OPS, from the city or municipality that has territorial jurisdiction over
the principal place of business of the OPS for the current period.

The Bangko Sentral may, in the course of the evaluation of the application for
registration, require submission of documents and information in addition to
those listed above.

b. Fees for Registration. Upon the issuance of the Certificate of Registration

(COR), an OPS shall pay a registration fee of P 20,000.00. A fee of P 1,000.00
shall be assessed and collected for the replacement of a COR for whatever
reason.
49
c. Date of Registration. All OPS that have not commenced operations shall
register with the Bangko Sentral within one (1) month from the start of their
operations except in the following instances where registration is required
prior to commencement of operation:
(1) A regulator or government agency requires appropriate action from the
Bangko Sentral prior to the start of the OPS business;
(2) The OPS offers remittance services as well as other similar activities
performed by money service businesses; and
(3) Such other circumstances, as may be determined by the Monetary Board.

OPS that are currently operating. The following requirements shall apply to an
OPS that is already operating:

a. Application for Registration. An OPS that has already commenced

operations by September 2019 shall submit the following documents and
information to the appropriate department of the Bangko Sentral:
(1) Duly accomplished Application for Registration (Appendix 502-2) signed
by the president, chief executive officer, or a senior officer holding an
equivalent position;
(2) Business Plan, which includes a description of existing business, business
model, and target markets; and
(3) Copy of the business registration/permit indicating the line of business of
the OPS, from the city or municipality that has territorial jurisdiction over
the place of establishment and operation of the OPS for the current
period.

The Bangko Sentral may, in the course of the evaluation of the application for
registration, request submission of documents and information in addition to
those listed above.

b. Fees for Registration. Upon the issuance of the COR, an OPS shall pay a
registration fee of P 20,000.00. A fee of P 1,000.00 shall be assessed and
collected for the replacement of a COR for whatever reason.

c. Date of Registration. An OPS that is currently operating at the time of the

effectivity of R.A. No. 11127 shall register with the Bangko Sentral by
complying with the registration requirements prescribed under this Section
not later than three (3) months from effectivity of this Circular.

502.4 Banks and EMIs. The following requirements shall apply to banks and
electronic money issuers (EMIs) that are currently operating, or will later operate,
as an OPS as defined under R.A. No. 11127 and clarified in this Section:

a. Registration through Notification. A Bank or an EMI shall submit to the

appropriate department of the Bangko Sentral, a notification of its activities
as an OPS. It shall include a description of its existing business as an OPS,
business model, and target markets. The submission shall be signed by the
president, chief executive officer, or a senior officer holding an equivalent
50
 position. The Bangko Sentral may, in the course of the evaluation of said
submission, require additional documents and information in relation to said
notification.

b. Date of Submission. A bank or an EMI shall submit the notification with the
supporting documents prescribed under this Section within one (1) month
from the start of their operations as OPS, as appropriate.

502.5 Issuance of Bangko Sentral Certificate of Registration (COR). Upon

receipt of the duly accomplished Application for Registration (OPS Form 1)
found in Appendix 502-2 and the required documents, or Notification, as the
case may be, from the OPS, the Bangko Sentral shall issue a provisional COR
(PCOR). It shall be valid for the period stated therein unless indicated otherwise
in the List of PCORs published on the Bangko Sentral website. Thereafter, the
Bangko Sentral shall issue a COR to the OPS, if warranted, and provided that the
submitted documents satisfy the regulatory requirements.

502.6 Notice Requirements for Registered Operators of Payment Systems.

Registered OPS, except for banks or EMIs registered as OPS, shall give notice to
the appropriate department of the Bangko Sentral of the following events
within five (5) business days from the date of occurrence.

a. Commencement of operations for OPS required to register prior to

operations.
b. Change of ownership or control of the OPS that will result in ownership or
control of at least twenty percent (20%) of the voting shares of stock by any
person or which will enable such person to elect, or be elected as, a director
of the OPS. The notice shall indicate the details of the change of ownership
or control. The change in ownership also be subject to the approval
requirements as may be required by RA No. 11127 and its implementing rules
and regulations.
c. Suspension or revocation of permits, licenses or other authorities issued to
the OPS by other government agencies. The notice shall include the ground/s
for the suspension or revocation, and the action taken or to be taken by the
OPS relative to the suspension or revocation. Thereafter, the OPS shall
provide bi-weekly updates on the status of the suspension or revocation of
its permits, licenses, or other authorities issued by other government
agencies.
d. Change in key officers or representatives authorized to officially
communicate to the Bangko Sentral.
e. Change of registered/business name.

In case of change in the registered/business name, the Bangko Sentral shall issue
a new COR indicating the new registered/business name of the OPS upon its
payment of a replacement fee of P 1,000.00, submission of the amended Articles
of Incorporation (AOI) or equivalent document reflecting the new
registered/business name and return of the COR issued by the Bangko Sentral
to the OPS.

51
502.7 Operating a Payment System Without Registration. When an OPS
required to be registered under this Section is found to be operating a payment
system without registration, the Monetary Board shall issue a directive to such
OPS to comply with the registration requirements under this Section. If the OPS
remains unregistered, the Monetary Board shall issue an order to such OPS to
stop from operating a payment system without registration and to take
immediate action to register. The Bangko Sentral may coordinate with other
regulators and concerned government agencies to inform them that the said
OPS is operating a payment system without registration from the Bangko
Sentral. The above is without prejudice to the enforcement actions by the
Bangko Sentral, as may be applicable, under existing laws, rules and regulations.

502.8 Enforcement Action. Enforcement Action under Subsection 502.8 was

transferred to Part 15 of the Manual.

(Circular No. 1049 dated 09 September 2019)

52
503 OPS THAT ENGAGE IN MERCHANT PAYMENT ACCEPTANCE ACTIVITIES

503.1 Policy Statement. The Bangko Sentral recognizes that enabling merchants
to accept different forms of payments for the sale of goods and/or services in a
safe and efficient manner is vital in facilitating the smooth flow of funds in the
economy and contributing to the wider adoption of digital payments in the
country. For digital payments to thrive, minimum standards and good practices
must be established to: (i) safeguard the funds received from customers of
merchants; and (ii) protect the rights and interests of end-users (i.e., merchants)
that deal with operators of payment systems (OPS) that engage in merchant
payment acceptance activities (MPAA).

Pursuant to Republic Act No. 11127, or the National Payment Systems Act (NPSA),
the National Retail Payment System (NRPS) Framework, and the Payment
System Oversight Framework, the Regulatory Framework for MPAA ensures that
OPS that engage in MPAA adopt commensurate governance structures and
appropriate measures to effectively manage risks attendant to their business
model, including risks related to settlement, operations, information technology
(IT), anti-money laundering and countering terrorism and proliferation financing
(AML/CTPF), and end-user protection.

503.2 Scope and Applicability. This policy covers any OPS engaged in or
intending to engage in MPAA in the Philippines (OPS-MPAA). For avoidance of
doubt, MPAA includes merchant acquisition services. As OPS, all OPS-MPAA
shall comply with the pertinent provisions of this Section, and laws, rules, and
regulations applicable to OPS.

An OPS is considered engaged in MPAA in the Philippines if the OPS, merchant,

or both are located in the Philippines.

For Banks and Electronic Money Issuers-Non-Bank Financial Institutions (EMI-

NBFI). An OPS engaged in or intending to engage in MPAA that has a concurrent
banking or EMI-NBFI license is expected to adhere to the more stringent
requirements between the guidelines in this policy and the applicable
provisions of the Manual of Regulations for Banks (MORB) and the Manual of
Regulations for Non-Bank Financial Institutions (MORNBFI), as applicable, to
satisfy the overall regulatory expectations of the Bangko Sentral.

Banks and EMI-NBFIs engaged in MPAA shall comply with the provisions on
payments to merchants, pricing mechanism, and reportorial requirements in
this framework.

For OPS-MPAA under the Regulatory Jurisdiction of Other Local or Foreign

Authorities or Overseers of Payment Systems. An OPS-MPAA that is under the
regulatory jurisdiction of other local or foreign authorities or overseers of
payment systems shall comply with the requirements of this framework,
particularly the provisions on payments to merchants, pricing mechanism, and
reportorial requirements.

53
For the requirements in this Section that are also imposed by other local or
foreign authorities or overseers of payment systems, the OPS-MPAA may submit
to the Bangko Sentral proofs of compliance with the similar requirements by
said authorities. The Bangko Sentral may consider the documents submitted by
the OPS-MPAA in evaluating compliance with requirements in this Section and
direct the OPS-MPAA to submit additional documents to substantiate the proof
of compliance, as necessary.

503.3 Governance and Risk Management Measures Applicable to OPS-MPAA.

OPS-MPAA shall observe governance and risk management measures
commensurate to the activities they perform, subject to compliance with the
requirements under Section 401 for Governance, Section 903.1 on Outsourcing,
Section 903.2 on Information Technology Risk Management (ITRM), Section
1003 on AML/CTPF and Section 1103 on End-User Protection of the Manual.

503.4 Authority to Engage in Merchant Acquisition. An authority from the

Bangko Sentral must be obtained prior to engaging in merchant acquisition in
the Philippines. Regardless of the status of its compliance with the registration
requirement under Section 502 of this Manual, an OPS that intends to engage
in merchant acquisition shall secure a Merchant Acquisition License (MAL) with
the appropriate supervising department of the Bangko Sentral.

An OPS granted with MAL by the Bangko Sentral, herein referred to as OPS-MAL,
is not required to register as OPS and is considered compliant with the rules and
regulations on the registration of OPS under Section 502 of this Manual.

The guidelines on application for MAL are set out in Appendix 503-1 of this
Manual. The appropriate supervising department of the Bangko Sentral may
request submission of additional documents and information during the
evaluation of the application for MAL. The application for MAL shall be processed
only upon receipt of the complete documents. Applying for a MAL authorizes
the Bangko Sentral to conduct onsite verification of the documents and/or
representations stated in the application filed in connection with the license or
authority applied for. Any misrepresentation in the documents submitted may
be used as ground for denial of the MAL application.

Banks and EMI-NBFIs that intend to engage in merchant acquisition as part of

their normal or allowed business operations need not apply for a separate
license from the Bangko Sentral. Prior notification (Appendix 503-5) to the
appropriate supervising department of the Bangko Sentral shall suffice.

503.5 Registration for Engagement in Other MPAA. An OPS engaged in or

intending to engage in MPAA other than merchant acquisition shall register
with the Bangko Sentral in accordance with Section 502 of this Manual.

503.6 Capital Requirement. The minimum required capital for OPS–MAL shall
be based on the following MAL categories:

Category Average monthly value of collected Minimum

54
 funds transferred to merchants in Required Capital
the applicable period
A Less than ₱100 million ₱5 million
B ₱100 million and above ₱10 million

In case of application for license, the category shall be based on the expected
average monthly value of collected funds to be transferred to merchants while
engaged in merchant acquisition in the first twelve (12) months of operation by
the OPS. The capital requirement shall be complied with on the date of
application.

When the average monthly value of collected funds transferred to merchants for
two (2) consecutive calendar years while operating as an OPS-MAL warrants a
change in category, the corresponding minimum required capital shall apply. In
case there is a need to increase the minimum required capital pursuant to a
change in category, the OPS-MAL shall comply with the revised capital
requirement within sixty (60) business days after the start of the calendar year.

The minimum required capital shall be computed as paid-in capital stock plus
additional paid-in capital, deposit for stock subscription, retained earnings, and
undivided profits, less intangible assets.

For OPS-MAL that are banks and EMI-NBFIs, the minimum required capital shall
be the highest among: (a) the required minimum capitalization for banks
depending on bank category, (b) the required minimum capitalization based on
EMI category, or (c) the minimum capitalization under the categories in this
Subsection, as applicable.

503.7 Governance for Merchant Acquisition Services. For OPS-MAL, the

following provisions shall govern merchant acquisition services:

a. Merchant Management. An OPS–MAL shall have prudent merchant payment

acceptance criteria and procedures for managing its relationship with
merchants approved by its board of directors.

(1) Merchant Due Diligence (MDD). A risk-based approach shall be

undertaken depending on the type of merchant, business relationship or
nature of transaction or activity and risk profile. An OPS–MAL shall
formulate a risk-based and tiered MDD that involves reduced MDD for
potentially low-risk merchants and enhanced MDD for higher-risk
merchants, which shall include:

(a) Merchant Identification. An OPS–MAL shall establish and record the

true identity of their merchants based on official documents. They
shall maintain a proportionate system of verifying the true identity of
their merchants and, in the case of corporate clients, require a system
of verifying their legal existence and organizational structure, as well
as the authority and identification of all persons purporting to act on

55
 their behalf.

(b) Merchant risk assessment. An OPS–MAL shall understand, evaluate,

analyze, and periodically assess the overall potential risk of a
merchant, such as risks related to its financial capacity, legitimacy,
operations, money laundering/terrorism financing/proliferation
financing, cybersecurity, and consumer protection, among others,
using reliable documents, information, or any other appropriate
measures to undertake the background verification. When applicable,
additional controls may be instituted to manage the potential risk of
a merchant.

(c) Merchant monitoring. An OPS–MAL shall ensure periodic monitoring

of its merchants in terms of adherence to their agreement and the
merchant’s business activities and shall keep records of these
monitoring activities. In an existence of a valid ground based on the
suspension or termination clause in the governing agreement, an
OPS–MAL shall immediately suspend or terminate any merchant
payment acceptance relationship with a merchant.

(2) Governing agreement. A written agreement between the merchant and

the OPS–MAL shall be executed to govern the relationship, which, at the
minimum, shall cover the following:

(a) Account maintenance, such as information on:

(i) business ownership and/or management,
(ii) business office and/or store address, and
(iii) nature of business;
(b) Timing and manner of the transfer to the merchant of the funds
collected by the OPS–MAL, including the designation by the merchant
of the means of receiving payment and merchant account where the
funds will be transferred, as applicable;
(c) Disclosures and stipulations on the sharing of risks associated with
merchant acquisition;
(d) Roles and responsibilities of each party, procedures and timelines on:
(i) Liability management in case of negligence/security breaches/
fraud, among others;
(ii) Reconciliation process;
(iii) Safeguards against unauthorized disclosure of customer data and
other protected information, data loss, fraud, and cyber threats; as
well as to facilitate the secure and efficient sharing of data among
authorized entities;
(iv) Handling and resolving complaints, refund/failed transactions, or
customer returns; and
(e) Suspension and termination clauses, where the grounds include the
following:
(i) for suspension, breach of the agreement or a merchant is
suspected to be involved in fraudulent or illegal activity based on

56
 information obtained from a reliable source, a complaint from an
aggrieved party or a finding under its own systems, and
(ii) for termination, merchant’s involvement in fraudulent or illegal
activity substantiated by adequate and appropriate evidence after
the investigation or assessment of the OPS–MAL or conviction with
finality by a court of law.

(3) Dispute resolution. An OPS–MAL shall have in place a dispute resolution

framework to ensure prompt and effective resolution of cases with its
merchants and cases with its third-party service providers. It shall contain
details, such as the transaction life cycle, a detailed explanation of types
of disputes, the process of dealing with them, the responsibilities of all
parties, the procedure for addressing the grievance, and the turnaround
time for each stage.

b. Payment to Merchants. The OPS–MAL shall maintain designated account/s

with a Bangko Sentral Supervised Financial Institution (BSFI) where funds
received or collected on behalf of merchants are held separate from the OPS–
MAL’s own funds and shall be properly accounted for. The funds in the
designated deposit account/s shall only be used for settlement purposes
with the merchants and/or transfers related to merchant acquisition, such as
chargebacks to payment instrument issuers or the charging of merchant
fees. In case there is a need to shift the designated account from one BSFI to
another, the said change shall be effected in a time-bound manner without
impacting the payment cycle for the merchants.

OPS–MAL shall ensure timely and complete funds settlement with merchants.
The settlement period shall be agreed upon by the OPS–MAL and the merchant,
but shall not be longer than two (2) business days from the day the funds are
received by the OPS–MAL for transfer to a merchant.

In the event that the payment cycle stated in the merchant agreement is
more than the agreed maximum number of days as stated above, an OPS–
MAL shall submit justification, including supporting documentation, to the
appropriate supervising department, subject to prior approval of the Bangko
Sentral. Without such approval, the OPS–MAL shall undertake safeguarding
measures, which may include placing the outstanding funds in a trust
account or securing a bank guarantee against it in a BSFI or any other
measures acceptable to the Bangko Sentral.

OPS–MAL shall be liable to provide the collected funds to merchants in the

event the issuer of payment instruments or any other parties involved in the
handling of such funds fail to fulfill their settlement obligations, regardless
of dispute with other parties.

c. Pricing Mechanism. Notwithstanding the consumer pricing rules under the

NRPS Framework and subsequent relevant issuances, OPS–MAL shall adopt
a pricing mechanism whereby merchant fees may be charged to merchants
availing of merchant payment acceptance activities. Such pricing
57
 mechanisms shall be reasonable, transparent, market-based, and
proportional to the cost of the services offered in order to sustain the
business operations of the parties involved.

503.8 Commencement of Merchant Acquisition Service. An OPS–MPAA

granted a MAL shall commence actual engagement in merchant acquisition
within six (6) months from the date of issuance of the license, unless a longer
period has been approved by the Bangko Sentral. Failure to commence actual
merchant acquisition within the six (6) month period shall render the license
automatically revoked.

Within five (5) business days from the actual start of merchant acquisition
service, the OPS–MAL shall notify in writing the appropriate supervising
department of the Bangko Sentral of the actual start date. Such notification
shall be duly acknowledged by the appropriate supervising department of the
Bangko Sentral.

503.9 OPS Without the Appropriate License from the Bangko Sentral. When an
OPS required to be licensed under this Section is found to be engaging in
merchant acquisition without a prior license, the Monetary Board shall issue a
directive to such OPS to comply with the licensing requirements under this
Section. If, after notice to the concerned OPS, the OPS continues to engage in
said activities without the requisite license, the Monetary Board shall issue an
order to such OPS to cease engaging in said activities and to take immediate
action to apply for a license. The Bangko Sentral may coordinate with other
regulators and concerned government agencies to inform them that the said
OPS do not have the required license from the Bangko Sentral to engage in such
activities. This procedure is without prejudice to the enforcement actions that
may be deployed by the Bangko Sentral, as may be applicable, under existing
laws, rules, and regulations.

503.10 Continuing Compliance. OPS–MAL shall continuously comply with the

operational standards and requirements set out in this Section and other
relevant sections of this Manual. Any deviation or non-compliance after securing
a license shall be a basis for the imposition of appropriate enforcement actions.
Bangko Sentral authorized personnel shall have the authority to conduct an
assessment, examination, and/or systems and operational review pursuant to
Section 101 of this Manual.

503.11 Voluntary Termination of Merchant Acquisition Service. Any OPS-MAL

that wish to cease engaging in merchant acquisition shall secure prior approval
of the Bangko Sentral on the termination and ensure compliance with the
following procedures:

a. At least three (3) months prior to intended date of termination, submit to the
appropriate supervising department of the Bangko Sentral a request for
approval, signed by the president or officer of equivalent rank, stating the
details and justification for the voluntary termination, and submitting the
Board or stockholders’ approval of the same;
58
b. Upon receipt of the notice of the Bangko Sentral approval: (i) send written
notice of termination to merchants by personal service, or registered
mail/other mail couriers wherein proof of receipt of notice by the merchants
shall be kept on file and made available upon request of the Bangko Sentral;
and (ii) publish notice in a newspaper of general circulation and post the
same in the official website of the OPS-MAL, if applicable; and

c. Submit to the appropriate supervising department of the Bangko Sentral

within five (5) business days from date of termination, a certification signed
by the president or officer of equivalent rank, stating that the: (i) termination
was implemented, (ii) notification requirement under Item “b” above has
been complied with, and (iii) the OPS-MAL has no remaining obligations to
its merchants.

503.12 Reportorial Requirements. The guidelines on reporting under Section

103 of this Manual shall apply to OPS-MPAA. As such, OPS-MPAA shall comply
with the reportorial requirements for OPS. In addition, OPS–MPAA shall submit
the following secondary report to the appropriate supervising department of
the Bangko Sentral:

Report Title Frequency Submission Deadline

Annual audited financial Annually 120 business days after end of
statement reference year

In addition to above, an OPS-MAL shall submit the following secondary reports

to the appropriate supervising department of the Bangko Sentral:

Report Title Frequency Submission Deadline

Statistics related to MPAA Quarterly 15 business days after end of
(Appendix 503-2) reference quarter
Notice to the Bangko As needed 30 business days prior to effective
Sentral of significant date of proposed change
changes (Appendix 503-3)
Notice to the Bangko As needed 60 business days after occurrence
Sentral of change in
average monthly value of
collected funds to be
transferred to merchants
that would change license
category (Appendix 503-4)

For this purpose, significant changes include:

a. Changes in ownership, directors, and/or key officers or representatives

authorized to officially communicate to the Bangko Sentral; and

b. Any proposed changes to merchant payment acceptance model of the

59
 OPS–MPAA that are significant or change the risk profile of the business
model, which includes but is not limited to any changes in target market,
mode of payment acceptance, as well as payment and settlement flow.

The guidelines for the preparation and electronic submission of the reports
required in this Section will be covered by a separate issuance.

Statistics related to MPAA shall apply to OPS-MAL that are not required to
submit the monthly report on Electronic Payments and Financial Services
pursuant to Section 501.6 of this Manual.

Failure to comply with the provisions of this Subsection shall cause the
concerned OPS-MPAA to applicable sanctions for Erroneous, Delayed, Erroneous
and delayed, or Unsubmitted Reports, as prescribed under Subsection 103.5 of
this Manual.

503.13 Enforcement Actions. Failure to comply with the requirements of this

Section shall subject the OPS-MPAA to the appropriate enforcement action
provided under Part Fifteen of this Manual.

60
 PART SIX
RESERVED

61
 PART SEVEN
SETTLEMENT

701 SETTLEMENT OF ELECTRONIC PAYMENTS UNDER THE NATIONAL RETAIL

PAYMENT SYSTEM (NRPS) FRAMEWORK

701.1 Policy Statement. It is the thrust of the Bangko Sentral to ensure the efficiency
of payment systems in the country. In line with this, the Bangko Sentral requires
BSP-Supervised Financial Institutions (BSFIs) participating in an Automated
Clearing House (ACH) for electronic payments to ensure that this ACH provides
certainty of settlement of the multilateral clearing obligations of the clearing
participants. The settlement scheme agreed upon by the clearing participants shall
form an integral part of the comprehensive risk management (i.e., including
management of credit and settlement risks, among others) for electronic payment
services.

701.2 Minimum requirements for the operation of a settlement mechanism for

electronic payments. Settlement mechanisms for electronic payments shall meet
the following minimum requirements:

a. A clearing participant or its settlement sponsor shall maintain with the Bangko
Sentral a demand deposit account (DDA) which shall be used specifically for the
settlement of the clearing participant’s net clearing obligations arising from
electronic payments;

b. Distinct DDAs shall be separately established and used for each of the following:
(i) instant retail payments, and (ii) batch clearing and settlement of electronic
payments, unless otherwise allowed with prior BSP approval;

c. The clearing participant or its settlement sponsor shall prefund the settlement
of its net clearing obligation through the DDA stated in Item “a” above, ensuring
that such account can sufficiently cover said obligation at any point during a
settlement cycle. In determining the adequate amount of prefunding, the
clearing participant/settlement sponsor shall consider the number of
settlement cycles within a clearing day, and the length of settlement cycles such
as during weekends and holidays, among others;

d. The clearing participants shall agree on thresholds which shall be the bases of
the CSO in determining if the balances of the DDAs are sufficient for clearing and
settlement of the participants’ electronic payments in any given settlement
cycle.

In the case of instant retail payments, the CSO shall execute a notification
process that enables the clearing participants to efficiently monitor movements
in their instant retail payment positions, and at the same time alerts them to
place additional funds in their DDAs particularly when the agreed-upon
threshold is breached.

As regards batch clearing and settlement of electronic payments, the CSO shall
provide a system that enables clearing participants to monitor movements and
place additional funds, when necessary, in their DDAs in a timely manner for
each and every settlement cycle;

62
e. Use of the DDA instead of the established distinct DDAs may be allowed, subject
to prior BSP approval;

f. The service contract between the clearing participants and the CSO shall
include, at a minimum, the following provisions:

(1) For instant retail payments:

(a) The CSO shall record the clearing participants’ DDA balances obtained
from the Bangko Sentral at the start of every settlement cycle and
monitor the clearing participants’ net clearing obligations against their
respective account balances;
(b) Should the instant retail payments position (funds in the DDA minus net
clearing obligation/withdrawal from the DDA) of any of the clearing
participants breach their agreed-upon thresholds, the CSO shall
immediately send an electronic notification to the concerned clearing
participant; and
(c) Any instant retail payment which is not fully covered by the
corresponding DDA or which will result in a negative instant retail
payments position shall be rejected by the CSO. A clearing participant
with an instant retail payments position of zero shall be suspended from
carrying out further outgoing instant payment transactions until said
participant registers a positive position on account of its incoming
payment transactions and/or subsequent deposits into its DDA.

(2) For batch clearing and settlement of electronic payments:

(a) The CSO shall record the clearing participants' DDA balances obtained
from the Bangko Sentral prior to the initial settlement cycle of the day;
(b) The CSO shall allow clearing participants to effectively monitor the
sufficiency of their DDA balances for every settlement cycle by providing
access to timely data on the clearing participants’ net clearing obligations
against their respective DDA balances;
(c) Should the balance of a clearing participant’s DDA be insufficient to settle
its net clearing results, the participant shall ensure prompt settlement by
funding its DDA with the Bangko Sentral either prior to the specified
settlement cut-off time or within the agreed-upon grace period after the
settlement cut-off time. If the clearing participant fails to sufficiently fund
its DDA for a specific settlement cycle, the CSO shall exclude all of the said
clearing participant’s payment instructions from the net clearing results
transmitted to the Bangko Sentral for such settlement cycle;
(d) If the CSO receives a settlement failure report from the Bangko Sentral,
the CSO shall re-process the transactions and generate a revised net
settlement report which excludes all payment instructions from the
clearing participants with insufficient DDA balances; and
(e) Clearing participants that fail to sufficiently fund their net obligations in
a timely manner shall be subject to commensurate penalties as provided
under the ACH rules and regulations; and

g. Should the clearing participants determine that the funds in their DDAs for
electronic payments are excessive after taking into account their highest
potential clearing obligations and agreed-upon threshold, the clearing
participants shall be allowed to withdraw from their DDAs to enable them to
make optimal use of their funds, provided that such withdrawal will not result
in a deficiency in the required reserve of the bank/QB.

63
The Bangko Sentral shall not be precluded from deploying applicable regulatory
enforcement actions to concerned clearing participants notwithstanding the
inclusion of sanctions in the ACH for non-compliance with the clearing participants'
agreed-upon settlement mechanism.

701.3 Risk management. In view of the risks involved in the prescribed settlement
mechanism for electronic payments, including the possibility that a rejected
payment transaction of a client due to prefunding issues may give rise to serious
reputational damages to the concerned clearing participant, the BSFIs participating
in any ACH shall ensure that they have the necessary operational and liquidity risk
management measures in place. Such measures shall be designed in accordance
with the guidelines provided under Sections 146/146-Q/125-N on Operational Risk
Management and 145/145-Q/144-S/124-N on Liquidity Risk Management of the
MORB/MORNBFI.

701.4 Demand deposits for electronic payments as eligible reserves. The DDAs
maintained with the Bangko Sentral for the settlement of net clearing obligations
arising from electronic payment transactions shall form part of the banks’/QBs’
reserves against deposit and deposit substitute liabilities pursuant to Section
252/212-Q on the Composition of Reserves of the MORB/MORNBFI.

701.5 Enforcement Action. Enforcement Action under Subsection 701.5 was

transferred to Part 15 of the Manual.

(Circular No. 1000 dated 23 April 2018 and Circular No. 1135 dated 21 January 2022)

64
PART EIGHT
RESERVED

65
 PART NINE
OPERATIONAL RISK

903 SPECIAL RULES FOR MERCHANT PAYMENT ACCEPTANCE ACTIVITIES

903.1 Outsourcing. OPS engaged in or intending to engage in merchant

payment acceptance activities (MPAA) in the Philippines (OPS–MPAA) shall
remain responsible and accountable for the services outsourced to third-party
service providers. As applicable, it shall be the responsibility of the OPS–MPAA
to:

a. Conduct appropriate due diligence review of the third party to assess the
legitimacy and capability of the third party in performing the service to be
outsourced prior to entering into an outsourcing arrangement;
b. Ensure that the relationship/arrangement is supported by a written contract
that should contain, at a minimum, business continuity and disaster recovery
arrangements of the third party to ensure continuity of operations;
c. Ensure that the third party employs a high degree of professional care in
performing the outsourced activities as if these were conducted by the OPS–
MPAA itself. This would include, among others, making use of monitoring
and control procedures to ensure compliance at all times with applicable
Bangko Sentral rules and regulations;
d. Ensure that the third party adheres to international standards on
information technology (IT) governance, information security, and business
continuity in the performance of its outsourced activities and complies with
all laws and Bangko Sentral rules and regulations covering the activities
outsourced, especially on compliance with AML/CTPF requirements;
e. Undertake operational review of the third party at least on an annual basis as
part of risk management. This review should be documented as part of the
OPS–MPAA’s monitoring and control process;
f. Identify, delineate and document the responsibilities and accountabilities of
each party as regards the outsourcing arrangement, including planning for
contingencies. Notwithstanding any contractual agreement between the
OPS–MPAA and third party on the sharing of responsibility, the OPS–MPAA
shall be responsible to its merchants; without prejudice to further recourse,
if any, by the OPS–MPAA to the third party;
g. Review and monitor the security practices and control processes of the third
party on a regular basis, including commissioning or obtaining periodic
expert reports on adequacy of security to maintain the confidentiality and
integrity of data, and compliance with internationally recognized standards
in respect to the operations of the third party. Considering that the third
party may service more than one OPS–MPAA, the OPS–MPAA should ensure
that records pertaining to its transactions are segregated from those of other
OPS-MPAA; and
h. Maintain necessary documentation to show that outsourcing arrangements
are properly reviewed, and the appropriate due diligence has been
undertaken prior to implementation. The OPS-MPAA shall keep in its file
these documents and the same shall be made available to authorized
representatives of the Bangko Sentral for inspection.
66
903.2 Information Technology Risk Management (ITRM). OPS–MPAA shall
design and implement an ITRM that is risk-based, commensurate with the size,
nature, types of products and services, and complexity of its information
technology (IT) operations. There shall be a robust and effective information
technology and security risk management framework and processes, including
corresponding governance structures and controls, to ensure financial stability,
operational resilience, and end-user protection, which, at a minimum, shall
include the following:

a. Organizational structure that has well-defined roles and responsibilities for

information, business processes, applications, IT infrastructure, and fraud
prevention;
b. Policies and procedures on the identification, measurement, monitoring and
controlling of data security and IT risks on a periodic basis;
c. Appropriate IT and security infrastructure and systems for prevention and
detection of cybersecurity and fraud, including processes and procedures on
prevention, detection and monitoring to mitigate cybersecurity and fraud
risk;
d. Mechanism for monitoring, handling and reporting incidents and breaches
related to data security, IT and fraud;
e. Effective business continuity plan and disaster recovery plan for, at a
minimum, all critical business functions;
f. Independent assessment of risk management process and controls;
g. Sufficient resources to hire and train employees to ensure that they have the
necessary capacity and expertise to meet the requirements for IT and the
business lines it supports;
h. Baseline technology-related recommendations, latest encryption standards,
transport channel security, among others, based on international standards
and recognized principles of international practice for ITRM; and
i. Measures to ensure compliance with applicable data storage and privacy
requirements, such as not storing the customer card credentials within their
database or the server accessed by the merchant.

67
 PART TEN
ANTI-MONEY LAUNDERING / COUNTERING TERRORISM AND
PROLIFERATION FINANCING (AML/CTPF)

1003 SPECIAL RULES FOR MERCHANT PAYMENT ACCEPTANCE ACTIVITIES

OPS engaged in or intending to engage in merchant payment acceptance

activities (MPAA) in the Philippines (OPS–MPAA) shall adhere to the applicable
provisions under the Anti-Money Laundering Act, as amended, The Terrorism
Financing Prevention and Suppression Act of 2012, and targeted financial
sanctions (TFS)-related laws and their respective Implementing Rules and
Regulations (IRR).

68
 PART ELEVEN
END-USER PROTECTION

1103 SPECIAL RULES FOR MERCHANT PAYMENT ACCEPTANCE ACTIVITIES

OPS engaged in or intending to engage in merchant payment acceptance

activities (MPAA) in the Philippines (OPS–MPAA) shall be considered a Bangko
Sentral Supervised Institution (BSI) for the purposes of this Section and shall
have mechanisms in place that ensure the safety of end-users (i.e., merchants)
availing of its service. Such mechanisms shall comply with existing financial
consumer protection laws under the Financial Products and Services Consumer
Protection Act (RA No. 11765) and related implementing rules and regulations.

1104 CONSUMER REDRESS MECHANISM STANDARDS FOR ACCOUNT-TO-

ACCOUNT ELECTRONIC FUND TRANSFERS UNDER THE NATIONAL RETAIL
PAYMENT SYSTEM FRAMEWORK

1104.1 Policy Statement. The use of electronic payments continues to expand

and is expected to steadily grow. With the increased adoption of digital payment
services, the Bangko Sentral recognizes the need to ensure that Bangko Sentral-
Supervised Institutions (BSIs) that offer electronic fund transfers (EFTs) through
their participation in the Automated Clearing House/s (ACH) provide
appropriate and timely consumer recourse mechanisms on issues lodged by
consumers. Defined industry-wide actions and expectations on clearing switch
operators (CSOs) and ACH participants for the timely resolution of consumer
concerns relating to EFTs build trust and confidence in the use of digital
payments.

1104.2 Scope. The regulation shall apply to all CSOs and ACH participants which
provide domestic account-to-account EFTs as defined under the National Retail
Payment System (NRPS) Framework, which include Person-to-Person (P2P),
Person-to-Merchant (P2M), and Person-to-Biller (P2B) payments as provided in
the ACH clearing rules. This regulation does not cover dispute resolution
involving the delivery of products and/or services underlying the payment
transaction.

1104.3 Minimum requirements. The following shall be observed by concerned

parties:

a. Notification on EFTs

The NRPS framework requires immediate credit to the account of the

beneficiary after receipt of the clearing advice from the clearing switch
operator (CSO). Consistent with applicable Bangko Sentral rules and
regulations, the timeframe of immediate credit to the beneficiary's account
for near-real time EFTs is within 2 to 3 seconds from receipt of clearing advice
by the RFI from the CSO. For batched EFTs, turnaround time for credit to the
beneficiary's account shall not exceed two (2) hours from receipt of the
69
 clearing advice by the RFI from the CSO or not later than the next settlement
cycle for multiple settlement cycles.

Correspondingly, the ACH operating guidelines must clearly define the

following guidelines on notifications:

(1) The OFI shall timely provide notification to inform the sender about the
accurate status of the EFT. Subsequent notifications must likewise be
provided for updates or resolution.
(2) The RFI shall timely provide notification to the beneficiary about the
funds received in the beneficiary account.

The OFIs and RFIs shall utilize effective mode/s of notification that will ensure
the receipt by the sender and/or beneficiary of the required information
under this provision. Both OFI and the RFI must include relevant transaction
details that will allow both sender and beneficiary to easily identify the EFT.
Common language must be observed by all ACH participants in the
notification message, particularly in relaying the actual status of the EFT.

b. Return of Funds

For instant retail payments and corresponding use cases, the amount
debited from the sender’s account shall be returned to the sender’s account
within one (1) hour from receipt of sender instruction. This shall apply to
rejected transactions, returned transactions, and timed-out transactions.

For batch clearing and settlement of electronic payments and

corresponding use cases, the amount debited from the sender’s account
shall be returned to the sender’s account within two (2) hours from receipt
of settlement report from the CSO for rejected transactions and returned
transactions.

With regard to multiple-debit transactions and unsuccessful transactions as

a result of lapses in controls of the OFI, the amount debited from the sender’s
account shall be returned to the sender’s account under the following
guidelines:

(1) Within one (1) hour from receipt of sender instruction for instant
payments and corresponding use cases; and
(2) Within two (2) hours from receipt of settlement report from the CSO for
batch clearing and settlement of payment items and corresponding use
cases.

70
 The provisions of this section shall not apply to unauthorized or erroneous
transactions.

c. Collection and Return of EFT Fee

The parameters when to collect EFT fee, as well as the criteria as to when to
return the collected EFT fee must be clearly established in the ACH operating
guidelines.

For EFTs that warrant return of collected EFT fees to the sender, the OFI must
return the same to the sender in accordance with the timelines specified in
item “b” of this Section on the “Return of Funds”.

The sender shall not bear fees for unsuccessful transactions as well as for EFTs
that did not materialize due to disruption of operations of either the CSO or
ACH participants. The ACH operating guidelines shall provide parameters to
determine the entity-at-fault who will shoulder any cost related to the EFTs
affected by such circumstances.

In all cases, the rules on collection and return of EFT fees must be clearly
communicated to consumers by disclosing such information in various
channels and publicly available materials, pursuant to existing Bangko
Sentral regulations on Disclosure and Transparency.

d. Disruption of Services and Operations

The respective ACHs operating guidelines shall clearly define the action/s
required from the parties involved in an EFT (i.e., OFI, RFI, CSO) during
disruptions that affect the efficient delivery of EFTs. The guidelines shall
include the necessary actions from each party involved that ensures prompt
notification to end-users regarding the disruption.

The ACH operating guidelines shall provide as follows:

(1) CSO notification to the appropriate supervising department of the

Bangko Sentral, and the ACH participants on the occurrence of scheduled
and unscheduled downtime which shall include the timeline and
manner of notification, and on subsequent notifications for updates or
resolution;

(2) ACH Participants notification to consumers on the occurrence of

scheduled or unscheduled downtime:

71
 (a) Initial notification: Notice on the scheduled downtime or occurrence
of the unscheduled downtime. In the case of the latter, the ACH
operating guidelines shall identify the notification period to
consumers.
(b) Periodic notification: Subsequent notification to provide updates and
information on the status, reason, expected period and eventual
resolution of the downtime.

The actions and obligations that will be required under the ACH operating
guidelines during disruptions that affect the efficient delivery of EFTs shall
be separate and in addition to those required under the rules and regulations
on disruptions of financial services and operations that are covered by
applicable Bangko Sentral regulations.

e. Consumer Protection

OFIs have the primary responsibility of communicating to the sender, as their

own accountholders, the status and updates on investigations, and
resolution of unauthorized and/or erroneous transactions.

Meanwhile, all ACH participants shall conform with applicable Bangko

Sentral regulations, such as but not limited to provisions set forth under
Circular No. 1160 dated 28 November 2022 on the Regulations on Financial
Consumer Protection to Implement Republic Act No. 11765, otherwise known
as the “Financial Products and Services Consumer Protection Act.” Circular
No. 1160, and other relevant regulations shall be referred to in handling
unauthorized and/or erroneous transactions.

The ACH operating guidelines shall provide industry-level standards,

procedures, and information sharing mechanism, as applicable, from
relevant stakeholders, in handling possible root causes of unauthorized
transactions (e.g., social engineering, phishing, among others).

1104.4 Enforcement Action. Refer to Section 1501 of the MORPS.

72
 PART TWELVE
EFFICIENCY AND EFFECTIVENESS

1201 ADOPTION OF A NATIONAL QUICK RESPONSE (QR) CODE STANDARD

1201.1 Policy Statement. In line with its thrust of ensuring the safety, efficiency,
and reliability of payment systems in support of inclusive economic growth, the
Bangko Sentral requires the adoption of a National QR Code Standard.

1201.2 Adoption of a National QR Code Standard. The adoption of this standard

shall conform to the following guidelines:

a. The National QR Code Standard shall be established through a collaborative

undertaking where the Payment System Management Body28 (PSMB) takes
the lead in a consultative exercise involving the Payment Service Providers29
(PSPs), operators of payment systems, and Automated Clearing House (ACH)
participants.

(1) The PSMB shall, at the minimum, consider the following principles in
approving the National QR Code Standard:
(a) Interoperability to allow acceptance of multiple payment schemes
through the National QR Code;
(b) Simplicity to encourage usage of QR-enabled payment and financial
services; and
(c) Accessibility where an open infrastructure is adopted to facilitate the
acceptance of payments from various transaction accounts.

The PSMB shall approve the National QR Code Standard and inform the
Bangko Sentral of the approved Standard within ten (10) calendar days
from the date of approval or from the effectivity of this regulation (17
October 2019).

(2) PSPs shall adopt the National QR Code Standard approved by the PSMB,
within thirty (30) calendar days from the date the PSMB notified the BSP
of said approval.

(3) The National QR Code Standard shall be aligned with the globally
recognized standard to support interoperability not only on a domestic
but also on broader regional or global scale.

(4) To build public trust, PSPs shall give utmost priority to the safety of the
payers and the payees making use of QR-enabled payment and financial
services.

28
The Philippine Payments Management, Inc. (PPMI) is the PSMB in the Philippines.
29
PSPs are entities that provide payment and financial services to end users. These entities include banks and
non-bank electronic money issuers.
73
 (5) PSPs shall ensure that QR-enabled payment and financial services are
accorded appropriate treatment in the determination of applicable fees.

(6) PSPs shall ensure that the threats and vulnerabilities arising from their
QR-enabled payment and financial services are identified, measured,
monitored, and controlled accordingly.

(7) The PSMB shall maintain the document which contains among other
information, the following details on the National QR Code Standard:
(a) National QR Code specifications, such as the prescribed structure and
design of merchant-presented and customer-presented QR and the
conventions that apply to both of these modes;
(b) Technical operating guidelines on the use of the standard;
(c) Flow of settlement between the PSPs; and
(d) Minimum security features and functionalities of QR-enabled
payment and financial services.

Upon request by the Bangko Sentral, the PSMB shall make this document
available for review. The PSMB shall also inform the BSP of changes to this
document not later than ten (10) days after the approval of the changes
by the PSMB Board.

1201.3 Enforcement Action. Enforcement Action under Subsection 1201.3 was

transferred to Part 15 of the Manual.

(Circular No. 1055 dated 17 October 2019)

74
PART THIRTEEN
RESERVED

75
 PART FOURTEEN
LARGE VALUE PAYMENT SYSTEM RULES

1401 PESO REAL TIME GROSS SETTLEMENT (RTGS) RULES

1401.1 Policy Statement. The Peso Real Time Gross Settlement Payment
System (RTGS PS) is critical for maintaining price and financial stability, as
well as preserving public interest. This payment system ensures the smooth
flow of funds between financial institutions that maintain settlement
accounts (SAs) with the Bangko Sentral. It also facilitates funds transfers in
financial markets where these institutions trade securities and foreign
currencies for business and risk management purposes. By providing the
settlement facility for the open market operations of the Bangko Sentral, the
RTGS PS also supports the Bangko Sentral’s mandate of maintaining price
stability. Moreover, this system plays an indispensable role in upholding
public welfare, enabling the efficient and low-risk settlement of retail
payments in central bank money. In this regard, the Bangko Sentral adopts
rules in its capacity as owner and operator of the RTGS PS to govern the
operation of this designated payment system. These rules shall apply to the
participants of the RTGS PS, including banks and other financial institutions,
financial market infrastructures (FMIs), clearing switch operators (CSOs), and
critical service providers (CSPs).

1401.2 Governance30. The Bangko Sentral’s Peso RTGS Management

Committee (ManCom) shall manage the operation of the RTGS PS, which has
been designated by the Monetary Board (MB) as a Systemically Important
Payment System (SIPS). The ManCom is composed of officers of concerned
Bangko Sentral units and departments, which are involved in sustaining the
smooth functioning of the payment system. The ManCom reports to the
Monetary Board through the Governor of the Bangko Sentral. In performing
its function, the ManCom may seek guidance from the Bangko Sentral
Deputy Governor who is responsible for payments and currency
management.

The ManCom shall be responsible for sustaining the safe, efficient, and
reliable operation of the RTGS PS and ensuring compliance of this payment
system with regulatory expectations. In accomplishing this mandate, the
ManCom performs the following key functions:

a. Review and endorse for MB approval the policy proposals and/or

amendments pertaining to the operation of the payment system;

b. Oversee the implementation of programs, policies, and procedures,

which are aimed at ensuring that the operation of the RTGS PS aligns
with global standards or best practices and complies with laws,
regulations, and MB directives on payment systems;

30
The Bangko Sentral publishes a Primer on the Operation of the RTGS PS. The Primer covers Governance,
Business Continuity Management, and Transaction Fees, among other matters pertaining to the RTGS
PS.
76
c. Take initiatives or evaluate recommendations in response to the issues on
the operation of the RTGS PS and the evolving needs of the payment
participants; and

d. Collaborate with the industry, local regulators, and foreign central banks,
as applicable, on major RTGS PS rules and initiatives that can be
successfully accomplished through partnership with them.

Consistent with the Bangko Sentral’s Governance Policy for Operators of

Payment Systems under Part 4 of the MORPS, the Bangko Sentral shall adopt
the governance arrangement requirements to the extent applicable in the
context of a payment system that is owned and operated by a central bank.

1401.3 Compliance with Laws, Regulations, and Standards. The RTGS PS,
which includes its participants, shall comply with laws and regulations on
payment systems. The operation of the RTGS PS shall be aligned with the
relevant principles for FMIs. Should there be a conflict between local and
foreign laws or regulations in so far as the RTGS PS operation is concerned,
the Philippine laws and regulations shall prevail.

1401.4 Participants. The participants in the RTGS PS are, as follows:

a. Participants with SAs. These include banks, non-bank financial

institutions with quasi-banking functions, non-bank electronic money
issuers, and government agencies, as well as Bangko Sentral departments
that conduct monetary operations and those responsible for disbursing
and receiving funds on behalf of the Bangko Sentral. The participating
financial institutions may sponsor other entities into settlement.

Except for the Bangko Sentral departments, a Participation Agreement

mutually executed with the Bangko Sentral shall document and govern
the participation of these entities in the RTGS PS.

b. Sponsored Participants. These are financial institutions sponsored into

settlement through the RTGS system.

Any sponsorship into settlement shall comply with the following

guidelines:

(1) The transactions of a sponsored participant shall be considered as the

sponsoring participant’s own transactions. As such, the sponsoring
participant shall be held responsible for any loss, liability, or damage
caused by the sponsored participant insofar as settlement is
concerned.

(2) The sponsorship shall be covered by a formal contract between the

sponsoring and sponsored participants. The contract shall include a
provision addressing settlement default situations caused by either or
both the sponsoring and the sponsored participants.

77
 (3) The sponsorship terms and conditions should promote access to the
RTGS PS without compromising the safety and efficiency of the
system.

(4) The sponsoring participant shall adopt risk-mitigating measures to

ensure that the risks it assumes as sponsor are kept at manageable
level. These measures include the performance of due diligence to
ensure that the participant it sponsors complies with the RTGS PS
rules.

(5) The sponsorship contract shall require the sponsored participant to

submit pertinent information, if any, to the sponsor for risk
management purposes.

(6) The sponsoring and sponsored participants shall comply with the
Bangko Sentral’s reporting requirements pertaining to the
sponsorship.

c. FMIs. These are infrastructures that are interlinked with the RTGS system
to enable settlement of security, foreign exchange (FX), and other
financial market transactions in accordance with the Delivery versus
Payment (DvP) and Payment versus Payment (PvP) mechanisms, which
minimize the principal risk associated with such transactions.

The business between the Bangko Sentral and the operator of an FMI that
interfaces with the RTGS PS shall be conducted in accordance with a
contract in an appropriate form (e.g., Terms of Reference, Memorandum
of Agreement, Memorandum of Understanding, etc.), the provisions of
which shall be compliant with these rules.

d. CSOs. These are clearing organizations that are permitted to interconnect

with the RTGS system for purposes of settling retail payments in
accordance with the National Retail Payment System regulatory
framework.

The interlinkage of the CSOs with the RTGS PS shall be in accordance

with operating guidelines or a formal agreement between the Bangko
Sentral and the CSO. The provisions of the guidelines or agreement shall
be consistent with these rules.

e. CSPs. These are technology companies that provide solutions which are
vital to the operation of the RTGS PS.

Prior to providing services to the RTGS PS, a CSP shall enter into a service
contract with the Bangko Sentral, the provisions of which shall be aligned
with these rules.

1401.5 Participation Requirements and Procedure. The Bangko Sentral

adopts fair and risk-based criteria for determining the entities that can
participate in the RTGS PS. While participation is open regardless of the size
of a prospective participant and the complexity of its business, the Bangko
78
Sentral considers the applicants’ capacity to fulfil operational, financial, legal,
and regulatory pre-requisites to manage participant-induced risks for the
safety and efficiency of the payment system:

a. Operational requirements. The participants shall comply with the

Bangko Sentral’s connectivity requirements, which enable even small
financial institutions to participate in the RTGS PS. As required under
Section 1401.12 below, the participants shall also have a comprehensive
risk management system, which shall include system access controls,
information security measures, and business continuity plan.

b. Financial requirements. The participants shall manage their daily

liquidity positions and credit exposures in order not to cause settlement
failure, which may have systemic impact on the payment system.

c. Legal and regulatory requirements. The participants shall possess the

necessary licenses, authorities, and membership(s) to be able to
participate in the payment system.

The institutions applying to settle transactions through the RTGS PS shall

comply with the requirements and undergo the process shown in
Appendix 1401-1. The Bangko Sentral department that is responsible for
evaluating the application may gather relevant information from other
Bangko Sentral department(s).

1401.6 Cessation of Participation. Participation in the RTGS PS may be

terminated through any of the following modes, as applicable to the case of
the concerned participant:

a. Voluntary Withdrawal – refers to a mode where the participant voluntarily

ends its participation or surrenders its secondary license (e.g., banking
license), subject to the approval of the Bangko Sentral;

b. Closure of Operation – results from a decision of the MB or any lawful

authority to order the dissolution, revocation of license, or prohibit a
participant from doing business in the Philippines;

c. Merger or consolidation – terminates the participation of the merged or

acquired entity after the approval of the merger or consolidation by the
MB or any lawful authority; or

d. Placement under insolvency, bankruptcy or rehabilitation by a

competent court or quasi-judicial agency – results in the deactivation of a
participant’s account upon receipt by the Bangko Sentral of a notification
from the participant, which is required to inform the Bangko Sentral on
the day of the participant’s receipt of the order or resolution issued by the
court or quasi-judicial agency.

The Bangko Sentral shall issue an Advisory on the cessation of

participation of any of the participants.
79
 The process involved in the cessation of participation through voluntary
withdrawal is provided in Appendix 1401-2.

1401.7 Messaging Channels and Communication Standards

a. Messaging Channels. A participant may use one or more of the following

payment messaging channels:

(1) Society for Worldwide Interbank Financial Telecommunication

(SWIFT) messaging system – an internationally accepted messaging
system that runs through a leased line;

(2) Participant Browser – a web-based messaging system provided by the

Bangko Sentral to certain RTGS PS participants; and

(3) Virtual Private Network - Straight Through Processing (VPN-STP)

Gateway – a communication module that provides a means of
financial message exchanges between the central node and the
participants’ platforms using a VPN connection.

Due to changes in the operating environment of the Peso RTGS PS, the
Bangko Sentral may terminate or enhance any of the above channels, as
well as provide additional means of system access. A transitory period
shall be set out to ensure the smooth implementation of any of these
changes.

b. Communication Standards. The participants shall comply with the

payment messaging standards, including the mandatory message
contents, required by the Bangko Sentral31. They shall refer to pertinent
Bangko Sentral issuances, such as the Rulebook PH-ISO 2002232 Standard
on Payment Messages, for guidance on compliance with this rule.

1401.8 Types of Transactions. The RTGS system shall settle Peso-

denominated funds transfers. These transfers represent time-critical and
high-value payments, which include:

a. Movements of funds between the individual participants’ proprietary

accounts;

b. Interbank/inter-institution transfers for proprietary transactions;

c. Interbank/inter-institution transfers for further credit to customer

accounts;

d. Government collections;

31
Bangko Sentral Circular Letter (CL) No. 2019-053 dated 5 August 2019
32
Universal Financial Industry Message Scheme
80
e. Withdrawals from and deposits into the accounts maintained with the
Bangko Sentral;

f. Transactions with the Bangko Sentral - Financial Markets, including

placements in deposit facilities and maturities of deposits, availments
and maturities of the Overnight Lending Facility, and purchase or sale of
FX and securities;

g. Settlements related to the Bangko Sentral’s Intraday Settlement Facility

(ISF);

h. The money settlement leg of security trades;

i. The Peso leg of FX trades;

j. Clearing results for checks, automated teller machine (ATM) transactions,

digital payments, and other types of retail payments; and

k. Other large value transactions or those that are not considered as retail
payments under Bangko Sentral regulations.

1401.9 Settlement. Money settlements through the RTGS system shall

comply with the following rules:

a. Operating hours. The Bangko Sentral shall prescribe the normal operating
hours of the RTGS PS. Exceptions to regular business hours shall be in
accordance with the Bangko Sentral regulation on Public Sector Holidays
and other announcements of the Bangko Sentral.

b. SA balances. Before the opening of the RTGS PS, the Statements of

Account (SOAs) as of the immediately preceding business date shall be
released to the participants that maintain SAs with the Bangko Sentral.
The system shall be able to display the real-time account balances of
these participants at any time during the system’s business hours.

c. Required Levels of SA balances. The concerned participants shall

maintain an appropriate level of SA balances to cover their outgoing
payments in a timely manner. To prevent settlement risk arising from an
unreasonable number of transactions that cluster towards the end of the
business day, the participants that habitually schedule their settlements
near the close of business to take undue advantage of funding from
incoming payments shall be subject to appropriate penalties and
sanctions under Section 1401.20 below.

d. Execution of settlement instructions. The execution of settlement

instructions shall be done following the guidelines set out below:

(1) The processing of any settlement instruction shall be subject to the

sufficiency of funds in the SA of the sending participant.

81
 (2) Settlements shall be based on a set of business priority codes assigned
to payment transactions. Payments to participating government
institutions shall be prioritized over all other transactions.

(3) Settlement shall be allowed only if the sender and receiver maintain
SAs with the Bangko Sentral. In case of sponsored participation, the
sponsoring participant is construed to be the sender of the outgoing
payments and receiver of the incoming settlements of the sponsored
participant.

(4) Electronic notifications on the status of settlement shall be sent to the

sending participant if the payment were rejected or queued, or to
both the sending and receiving participants if the transaction were
settled.

(5) Except for settlements of clearing results, which are subject to the rule
under the next item, the RTGS system shall place the amount to be
settled in the queue if the account balance of a sending participant
were insufficient, until the:

(a) SA balance increases to a level that adequately addresses the

shortfall;
(b) participant cancels the transactions; or
(c) RTGS PS has closed for business.

(6) Clearing results, except for ATM transactions, shall be settled on an “all
or nothing” basis.

(7) The RTGS system shall have a gridlock resolution mechanism to

ensure continuous flow of settlements.

(8) The RTGS system shall reject all transactions that remain in the queue
at close of business.

e. Manual Settlements. Participants requesting manual settlements i.e., the

encoding of settlement instructions by the concerned Bangko Sentral
department, may be accommodated under the following circumstances:

(1) Settlement of transactions cannot be completed due to technical

and/ or connectivity issues, as validated by the Bangko Sentral’s IT
Support Team; or

(2) A payment has been erroneously credited to any of the SAs of the
Bangko Sentral departments, giving rise to the obligation of the
Bangko Sentral to make another transaction for the return of the
erroneous funds transfer.

To instill discipline in the participants, the Bangko Sentral may impose

penalties and sanctions on a sending participant that requests a manual
adjustment to correct its error.

82
 Requests for manual transfers from a participant to a non-participant, or
vice versa, shall not be accommodated.

The manual settlement process is provided in Appendix 1401-3.

f. Extension of Business Day. The Bangko Sentral may extend end of day
(EOD) upon confirmation of unforeseen events, which give rise to
abnormal RTGS PS conditions that hamper real-time settlement. These
conditions refer to delays, disruptions, and other operational problems
and issues, including those pertaining to ancilliary systems that connect
to the Peso RTGS system. The Bangko Sentral shall issue an Advisory to
announce an extended EOD not later than the normal close of business.

g. Finality of settlement. When a payment is transmitted by a participant,

FMI, or CSO to the RTGS PS and the SAs of the paying and receiving
participants have been debited and credited, respectively, in the RTGS
system, said payment shall become final and irrevocable and shall not be
subject to reversal for any reason whatsoever: provided, that, if it is shown
and established that the payment was not legally due, the settlement
shall remain valid and the return of the amount transferred shall
constitute a new monetary obligation between the receiving participant
and the sending participant.

The settlement of an ISF drawdown and the subsequent return of the

amount drawn shall be deemed final and irrevocable once the SA of the
concerned participant has been credited or debited in the RTGS system.

The RTGS PS shall not allow backdating of settlements except in

extraordinary circumstances where the RTGS PS needs to invoke
extended EOD operation.

h. Exchange-of-value settlements. To manage principal risk, the RTGS PS, in

coordination with the other FMIs that interface with it, shall adhere to the
DvP mechanism where it shall settle the money leg of a security
transaction only when the security involved has been delivered or at least
earmarked by the concerned FMI in favor of the buying participant. The
RTGS PS shall also adopt the PvP mechanism, where it shall settle the
Peso leg of an FX trade only when it has received a settlement instruction
from the FMI on the other end.

i. Automatic rejection of settlement instructions. Any instruction received

by the RTGS system before the activation of the payment receipt
functionality of the system and after the close of business shall be
automatically rejected.

j. Payment returns. The return of any erroneous settlement, such as a

payment to the wrong participant, a duplicate funds transfer, or an over-
payment, shall be requested by the sending participant from the
receiving participant. If the receiving participant that has control over the
funds at the time of the request fails to return the funds until the next

83
 business day, the sending participant is entitled to claim compensation
in accordance with the following rules:

(1) The claim for compensation shall be covered by an indemnity or

written undertaking by the sending participant and shall be made
within five (5) business days from the date of the erroneous
settlement. Otherwise, such claim for compensation may not be
honored by the receiving participant.

(2) The claim for compensation shall be computed based on the

following formula:

Compensation = (Amount of Payment) x (average Bangko Sentral

Overnight Deposit Facility rate) x (No. of Days of Delay) / 360

k. Housekeeping. EOD procedures such as maintaining back-up files and

releasing statement messages shall be performed after the RTGS PS
business hours.

l. Reconciliation. Each participant shall be responsible for the

reconciliation of the SA balances between the participant’s record and
that of the RTGS system. Any discrepancy noted during reconciliation
shall be reported for resolution to the concerned Bangko Sentral
department within seven (7) days from receipt of the statement of
account.

1401.10 Settlement Guarantee Mechanisms. The RTGS PS shall implement

the settlement guarantee mechanisms that the Bangko Sentral prescribes
for payments that are settled following the DNS scheme.

1401.11 Settlement of Disputes Between Participants. Disputes that may

arise between participants on matters pertaining to their RTGS transactions
shall be resolved by the ManCom. Final decisions of the ManCom shall be
binding on all parties to the dispute.

1401.12 Comprehensive Management of Risk. In line with the Bangko

Sentral’s regulatory expectations from institutions subject to its supervision
and oversight, the Bangko Sentral expects that the management of risks
arising from participation in the RTGS PS is an integral part of the
participants’ operation. To ensure that risks are comprehensively addressed,
the participants shall establish policies, procedures, and controls, which are
aimed at mitigating legal, credit, liquidity, general business, and operational
risks. The participants shall consider not only the risks to themselves but also
those that they pose to the RTGS PS.

1401.13 Reporting Requirements. A participant shall submit reports that the

Bangko Sentral may require on a periodic or on call basis. These reports,
which include an annual Attestation Report certifying that the participants

84
continue to comply with the terms and conditions on participation, should
be accurate, complete, and timely33.

1401.14 Intraday Settlement Facility (ISF). The Bangko Sentral provides an

ISF to eligible participants to ensure smooth flow of payments through the
RTGS PS and timely execution of interdependent settlements to manage
systemic risk.

The operation of the ISF shall be in accordance with Appendix 1401-4.

1401.15 Incident Management. Given the crucial role of the RTGS PS in the
financial system and the economy in general, the participants shall manage
adverse incidents in collaboration with the Bangko Sentral. In particular, the
participants shall:

a. Report immediately any problem on system access, report generation,

transaction monitoring, receipt of settlement notifications, and other
relevant issues after determining that the problem is attributable to
external factors based on investigation and support conducted by their IT
teams;

b. Coordinate with the Bangko Sentral in addressing the problem after

receiving Bangko Sentral notifications and instructions through email,
advisory, and the official social media platform which has been created
by the Bangko Sentral exclusively for the RTGS PS participants;

c. Make available any assistance and resources expected on their end to

contribute to efficient problem resolution; and

d. Inform the Bangko Sentral as soon as they have noted that the problem
has been addressed.

1401.16 Business Continuity. The participants shall operate with a resilient,

documented, and tested business continuity plan (BCP), which shall be
compliant with the requirements of Section 149 of the MORB and Section
148-Q of the MORNBFI on Business Continuity Management, as applicable,
and shall provide for the following contingency measures:
a. Primary fallback facility(ies). Back-up facilities which are located at the
main site;
b. Remote recovery site(s). Places which are sufficiently distant from the
main site and can be readily accessed for resumption of operation;
c. Connectivity back up(s). Secondary lines and network connections; and
d. Alternative operating procedure(s). Measures enabling settlement
processing, should a disruption prevent the performance of business-as-
usual procedures.

33
Should be free from error and submitted with supporting information, as necessary, within the
timeline prescribed by the Bangko Sentral
85
To strengthen their BCPs, the participants may have multiple access
channels in place. These channels include SWIFT, RTGS Participant Browser,
and VPN-STP.

In the case of FMIs and CSOs that interface with the RTGS system, a joint BCP
between the Bangko Sentral and the FMIs/CSOs shall be adopted to ensure
end-to-end continuity of interlinked clearing and settlement.

The participants shall review their BCPs at least annually to keep their plans
attuned to evolving market and payment system developments, as well as
technology advancements or enhancements. The BCPs shall also be tested,
on an annual basis, at a minimum, to ensure that they remain effective
despite changes in operating conditions.

Should the Bangko Sentral conduct a BCP test involving external

stakeholders, the concerned participants shall take part in said test.

1401.17 System Enhancement and Testing. The Bangko Sentral may

implement system enhancements in response to the participants’ needs.
The proposed system enhancements that require coordination between the
Bangko Sentral and the participants are those that involve alterations to
system functionalities, operational timelines, settlement procedures, access
controls, and other significant system modifications.

System enhancements shall undergo rigid testing before these are

promoted to the production environment. Should testing involve the
participants, they shall cooperate and make the required resources available
for the successful conduct of the tests.
The participants shall implement any operational and/or technical changes
required on their end to maintain compatibility of their respective
environments with the RTGS system.

1401.18 Settlement Fees and Other Charges. Payments made through the
RTGS system are subject to settlement fees and other charges, which shall
be automatically debited from the SAs of the participants. The fees and
charges shall support the operation and development of the RTGS PS.

The pricing methodology shall be reviewed periodically to determine any

necessary adjustment in response to internal and external developments.
The fees and charges may be waived as a relief measure or an incentive for
the participants.

1401.19 Supplementary Rules. The participants shall comply with the

supplementary rules that the Bangko Sentral may issue to properly
implement certain provisions of these rules, including, but not limited to,
procedural guidelines for settlement of disputes, reporting requirements,
fees and other charges, and business day schedule.

1401.20 Penalties and Sanctions. Depending on the gravity of the offense

committed by a participant, the Bangko Sentral may impose penalties and

86
sanctions, which may include fines, suspension of the participant’s privilege
to avail of the ISF, and suspension or termination of the participant’s access
to the RTGS PS. Repeat offenders shall be meted with stiffer penalties and
sanctions.

(Memorandum No. M-2022-049 dated 17 November 2022 and BSP Circular

1181 dated 10 November 2023)

87
 PART FIFTEEN – SANCTIONS AND ENFORCEMENT FRAMEWORK

1501 SANCTIONS

The Bangko Sentral may deploy enforcement actions to promote adherence

with the requirements set forth under this Manual and bring about timely
implementation of preventive and/or corrective measures. Any violation of
the provisions under this Manual shall subject the operators of payment
systems (OPS) and payment system participants, and/or their respective
directors, officers, and/or employees to the monetary and non-monetary
sanctions set forth in Sections 36 and 37 of R.A. No 7653, as amended, and
Sections 19 and 20 of R.A. No. 11127, as appropriate.

As part of its enforcement actions, the Bangko Sentral may issue directives
or impose sanctions which limit the level of or suspend any business activity
that adversely affects the safety and soundness of a BSP-supervised entity.
Further, depending on the gravity of the violation committed and the
circumstances attendant thereto, sanctions may include but not limited to
the following:

a. Suspension of offering new electronic financial products and services;

b. Suspension/revocation of authority to provide electronic financial
products and services; and
c. Suspension/revocation of authority to settle through the Philippine
Payment and Settlements System.

For OPS ad payment system participants that are banks and non-bank
financial institution subject to the provisions of the Manual of Regulations for
Bank (MORB) or the Manual of Regulations for Non-Bank Financial
Institutions (MORNBFI), the provisions on Supervisory Enforcement Policy
under Section 002 of the MORB and Section 002-Q/001-N of the MORNBFI
shall apply, as appropriate. Likewise, monetary penalties may be imposed on
these BSP-supervised financial institutions and/or their erring directors,
officers and/or employees pursuant to Section 1102 of the MORB and Section
1102-Q/806-N of the MORNBFI, as appropriate.

88
 GLOSSARY OF TERMS

ACH Participant - a financial institution duly licensed by the BSP that is a

PSMB member, and undertakes clearing in and is a signatory to at least one
(1) ACH.

ACH Participant Group (ACH-PG) - a group organized by ACH participants for

a payment stream or a group of similar payment streams for the purpose of
approving and implementing the clearing rules and agreements applicable
to a specific payment stream. It also liaises and consults with other parties in
relation to clearing.

Automated Clearing House (ACH) - a multilateral agreement among ACH

participants governing the clearing and settlement of payment orders for a
specific payment stream.

Bangko Sentral-Supervised Institution (BSI) refers to a person, natural or

juridical, that provides financial products or services under the jurisdiction
of the Bangko Sentral, as provided in existing laws, rules and regulations.

Batch clearing and settlement of electronic payments - pertains to the bulk

processing, clearing and settlement of payment instructions at set intervals
based on a specified cut-off time. It may be referred to as multiple batch
clearing and settlement of electronic payments when more than one cycle
is performed in a clearing day.

Beneficiary refers to a natural or juridical person or entity named as the

recipient of the electronic fund transfer sent to the beneficiary account.

Beneficiary account refers to a deposit account or e-money account

maintained by the beneficiary with the receiving financial institution.

Channel - the means by which an electronic financial product or service is

delivered(e.g., internet, phone, ATM).

Clearing - the process of transmitting, reconciling and, in some cases,

confirming payment orders prior to settlement, and the establishment of the
final obligations for settlement.

Clearing participants - shall refer to direct clearing participants, as defined

below.

Clearing switch operator (CSO) refers to the party designated which provides
clearing switch services by acting as the operator of payment system to be
used by the ACH participants in accordance with the guidelines and
principles set forth in related ACH documents.

89
Critical Service Provider (CSP) - an entity that provides process arrangements,
technology, service or infrastructure that is critical34 in ensuring the
operational reliability of an FMI, an operator of a designated payment
systems (ODPS) or, in some cases, multiple FMIs/OPSs. This does not include
entities that provide utilities and activities not directly related to the
essential operations of an FMI/OPS.35

Deferred Net Settlement (DNS) – a settlement mechanism which settles on

a net basis at the end of a pre-defined settlement cycle36

Delivery versus Payment (DvP) – a securities settlement method that

guarantees the transfer of securities only after payment has been made37

Delayed Report – A report that is compliant with the Bangko Sentral

reporting standards but was submitted after the prescribed deadline shall
be classified as “Delayed”. Submission of a compliant report beyond the
deadline prescribed by the Bangko Sentral shall be considered as willful
delay in the submission of reports.

Designated Payment System (DPS) - a payment system that is designated by

the Bangko Sentral either as a: (1) SIPS, or (2) PIPS.

Direct clearing participant - a financial institution that is: (a) duly licensed by
the BSP and is authorized to provide Electronic Payment and Financial
Services; (b) engaged in holding of funds of customers in the form of
accounts (bank account or electronic money account); (c) clears transactions
through an ACH and is the participant ultimately responsible for obligations
generated from cleared transactions; and (d) has a demand deposit account
with the BSP and a PhilPaSS plus member, or is sponsored into settlement by
a qualified sponsor which is a member of PhilPaSSplus and maintains a DDA
with the BSP, to settle its clearing obligations.

Electronic payment - synonymous to electronic fund transfer (EFT), shall refer

to transfers of funds between two transaction accounts in the same or
different BSFIs which are initiated and received using electronic devices and
channels to transmit payment instructions, and excludes domestic
remittance transaction under existing Bangko Sentral regulations, as defined
in Section 803/801-Q/501-S/401-P/501-N.

Electronic Payment and Financial Services (EPFS) - products or services

offered by BSP-supervised Financial Institutions (BSFIs) to enable customers
to receive payments or initiate financial transactions and other related

34
Critical service refers to a service delivered to an FMI/ODPS wherein the Capability of the FMI/ODPS to
perform its functions will be impaired if the service is not rendered. Assessment of criticality of service
shall consider substitutability, wherein a service may be considered critical if there is no substitute for said
service or, if substitute is available, transition shall require significant resources (time and financial
resources).
35
BIS, “Assessment methodology for the oversight expectations applicable to CSPs” (December 2014)
36 I
bid. Retrieved from
https://www.bis.org/cpmi/publ/d00b.htm?&selection=24&scope=CPMI&c=a&base=term
37
In bis.org glossary. Retrieved from
https://www.bis.org/cpmi/publ/d00b.htm?&selection=26&scope=CPMI&c=a&base=term.
90
services through an electronic device such as a computer, mobile phone,
Automated Teller Machine (ATM), and other devices. In particular, EPFS allow
customers to electronically access information on their transaction accounts,
move or receive funds from one account to another, or avail of credit,
investment, trust, or other banking products and/or services (e.g., online or
mobile loan application, electronic placement of funds in certain investment
outlets, etc.).

Erroneous Report – A report that was submitted within the prescribed

deadline, but is found to be non-compliant with the Bangko Sentral
reporting standards described in this Section shall be classified as
“Erroneous”. Submission of an Erroneous Report shall be considered as willful
failure to comply with the regulation.

Erroneous Transaction refers to an incorrect EFT as a result of any of the

following circumstances: (i) sending to an incorrect beneficiary account due
to the erroneous encoding of account number by the sender; and (ii)
sending to a beneficiary account an incorrect amount due to erroneous
encoding by the sender.

Financial Market Infrastructure (FMI) - a multilateral system among

participating institutions, including the operator of the system, used for the
purposes of clearing, settling, or recording payments, securities, derivatives
or other financial transactions.38

Fund - any unit of value that forms the consideration or object of

transactions.

Gridlock – a situation that can arise in a funds or securities transfer system, in

which the failure of some transfer instructions to be executed (because the
necessary funds or securities balances are unavailable) prevents a substantial
number of other instructions from other participants from being executed39.

Gridlock resolution – the optimizing mechanism automatically initiated by

the RTGS system to resolve a gridlock.

Instant retail payment - otherwise known as fast payment, is defined as an

electronic payment in which the transmission of the payment message and
the availability of "final" funds to the payee occur in real time or near-real
time on as near to a 24-hour and seven-day (24/7) basis as possible.40

Interoperability - enables financial products and services belonging to a

particular scheme or business model to be used or interoperated between
other schemes or business models usually of another institution. While
interoperability often times require technical compatibility between

38
Committee on Payments and Market infrastructures (CPMI) — International Organization of Securities
Commission {IOSCO) “Principles for Financial Market Infrastructures” (2012
39 I
bid. Retrieved from https://www.bis.org/cpmi/glossary_030301.pdf)
40
Bank for International Settlements. (2016, November). Fast payments – Enhancing the speed and
availability of retail payments. https://www.bis.org/cpmi/publ/d154.pdf

91
systems, it can only take effect once commercial/business interconnectivity
agreements have been completed.

Merchant – for Section 503 of the MORPS, refers to an end-user that avails of
merchant payment acceptance activities.

Merchant account - refers to a transaction account where funds from

merchant payment acceptance activities are received by merchant.

Merchant acquisition – refers to the service of accepting and processing

payment transactions on behalf of a merchant under an agreement,
resulting in a transfer of funds to the merchant.

Merchant fee – refers to the fee paid by the merchant to an operator of a

payment system for merchant acquisition services. This may be composed of
merchant discount rate, scheme fees, rental and maintenance charges for
terminals, among others.

Merchant payment acceptance activities (MPAA) – refers to the set of services

provided to a merchant to receive payment for sale of goods and/or services.
In general, services include merchant acquisition; providing the means to
accept various payment instruments and collect, secure, transmit and
process payment information; and providing support services related to the
payment.

Multiple-Debit Transaction refers to a single EFT initiated by the sender that

is erroneously debited more than once by the originating financial
institution from the sender’s account. The debited amount includes the
amount of the EFT and/or charges pertaining to the EFT.

National Payment System (NPS) - refers to all payment systems and

components including instruments, services, processes, schemes,
procedures, infrastructures and participants that ensure the circulation of
money or movement of funds in the Philippines.

National Retail Payment System (NRPS) - a policy and regulatory framework

that aims to establish a safe, efficient, and reliable retail payment system in
the Philippines.

Operator of a Payment System (OPS) — as defined under Section 502 of the

MORPS.

Originating Financial Institution (OFI) refers to an ACH participant that

sends an EFT. It is also where the originating account of the sender is
maintained.

Payment instrument - any instrument, whether tangible or intangible, that

enables a person to transfer funds.

Payment order - an order or message requesting the transfer of funds to the

order of the payee.
92
Payment Service Provider (PSP) - an entity that provides payment services to
end-users, such as consumers, merchants, and billers, including government
institutions.

Payment system - the set of payment instruments, processes, procedures

and participants that ensures the circulation of money or movement/transfer
of funds.

Payment System Management Body (PSMB) - a private industry-led self-

governing body that is duly recognized by the BSP to develop and enforce
rules and agreements pertaining to members’ clearing and settlement
activities in accordance with the NRPS Framework and applicable BSP
regulations. The body shall be comprised of retail payment industry
participants which are direct clearing participants. This body shall be a
juridical entity that is not-for-profit and with the power to set and implement
rules pertaining to members’ clearing activities.

Payment System Management Body (PSMB) - a body organized by

participants of a DPS for self-regulation and accredited by the Monetary
Board for the purpose of managing and governing participants of the
relevant DPS.

Payment versus Payment (PvP) – a process which ensures that the final
transfer of a payment in one currency occurs if and only if the final transfer of
a payment in another currency or currencies takes place41

Person-to-Person (P2P) payments refer to payments made by an individual

consumer to another individual consumer.

Person-to-Merchant (P2M) payments refer to payments made by an

individual consumer to a merchant for products purchased or services
rendered.

Person-to-biller (P2B) payments refer to payments made by an individual

consumer to a business classified as billers by the ACH participant (e.g., water
utility company) for utilities it provides, products purchased and/or services
rendered to the individual consumer.

Point of Interaction (POI) - a hardware and/or software whereby a customer

or user is able to query or initiate a transaction from his account. Examples
of POI include kiosk, smart device, etc.

Prominently Important Payment System (PIPS) - a payment system which

may not trigger or transmit systemic risk but could have a major economic

41 I
bid. Retrieved from
https://www.bis.org/cpmi/publ/d00b.htm?&selection=50&scope=CPMI&c=a&base=term
93
impact or undermine the confidence of the public in the NPS or in the
circulation of money.42

Real-Time Gross Settlement (RTGS) – a system that provides real time

settlement of payments, transfer instructions, or other obligations
individually on a transaction-by-transaction basis43

Receiving Financial Institution (RFI) refers to an ACH participant that receives

an EFT. It is also where the beneficiary account is maintained.

Rejected Transaction refers to an EFT that is not credited to the beneficiary

account because it was rejected by the CSO for reasons stipulated under the
respective ACH operating guidelines.

Retail payments - payments that meet at least one of the following

characteristics: (i) the payment is not directly related to a financial market
transaction; (ii) the settlement is not time-critical; (iii) the payer, the payee, or
both are individuals or non-financial organizations; and (iv) either the payer,
the payee, or both are not direct participants in the payment system that is
processing the payment. This definition of retail payment includes person-
to-person, person-to-business, business-to-person, business-to-business,
person/business-to-government, and government-to-person/business
payments.

Returned Transaction refers to an EFT that is not credited to the beneficiary

account because it was returned by the RFI for reasons such as but not
limited to, invalid account number, beneficiary account restrictions, excess
in allowable limit, and fraud or anti-money laundering and terrorist financing
and other concerns related to fraud, money laundering, and terrorist
financing.

Sender refers to any persons who originally initiates the instruction to pay.

Settlement - an act that discharges obligations in respect of fund transfers

between two (2) or more parties.

Settlement account (SA) – account maintained with the Bangko Sentral and
used by a participant for settling financial transactions through the RTGS
system.

Settlement Reports refer to reports provided by the CSOs to ACH participants

pertaining to the EFTs covered in a settlement cycle.

Settlement sponsor bank or Sponsoring bank - PSMB members who

undertake settlement directly through PhilPaSSplus.

42
European Central Bank (ECB), “Oversight standards for retail payments” (June 2003) as cited in the Bank
for International Settlements (BIS) “Central Bank Oversight of Payment and Settlement Systems” (May
2005).
43
In bis.org glossary. Retrieved from
https://www.bis.org/cpmi/publ/d00b.htm?&selection=56&scope=CPMI&c=a&base=term
94
Sponsored into Settlement Member - PSMB members who undertake
settlement in at least one (1) ACH by engaging the settlement services of an
ACH participant that can directly settle transactions through PhilPaSSplus.

Successful Transaction refers to an EFT initiated by the sender and which EFT
was credited to the correct beneficiary account.

Systemically Important Payment System (SIPS) - a payment system which

poses or has the potential to pose systemic risk that could threaten the
stability of the NPS.

Timed-out Transaction refers to an EFT that may or may not be successful

where no response was received from the CSO and/or the RFI within the
allowable response time set under related ACH operating guidelines.

Transaction account - an account (e.g., deposit account, e-money, electronic

wallet, etc.) held or maintained with a BSFI, which could be a bank or a non-
bank.

Unauthorized Transaction refers to an EFT initiated by any natural or juridical

person without the actual or imputed knowledge and consent of the sender.

Unsuccessful Transaction refers to an EFT that is not credited to the

beneficiary account for reasons such as but not limited to EFT did not reach
the CSO, non-transmittal of the EFT to the RFI, or other scenarios stipulated
under the respective ACH operating guidelines.

Unsubmitted – A report that was not submitted, or was submitted but do not
comply with the Bangko Sentral reporting standards by the time the next
report becomes due or upon lapse of thirty (30) business days from the
report’s submission deadline, whichever comes first, shall be classified as
“Unsubmitted”. Non-submission of required reports shall be considered as
willful refusal to comply with the regulation.

Working Group - In the context of an ACH, it is a group organized for a specific

payment stream under an ACH Participant Group. The ACH Working Group
is responsible for drawing up, reviewing or revising the rules and agreements
applicable to a specific ACH.

95
 LIST OF ANNEXES / APPENDICES:

Label Title
Appendix 102-1 Applicability of Principles for Financial
Market Infrastructures (PFMI) to Designated
Payment Systems
Appendix 102-2 Bangko Sentral Assessment Methodology
and Rating Framework
Appendix 201-1 National Retail Payment System (NRPS) Framework
Appendix 401-1 Required Certifications and Supporting Documents for
the Confirmation of the Election/Appointment of
Directors/Officers
Appendix 401-2 Bio-data of Directors and Officers
Appendix 401-3 Authorization Form for Querying the Bangko Sentral
Records for Screening Applicants and Confirming
Appointments of
Directors and Officials
Appendix 501-1 Guidelines on Licensing of Electronic Payment and
Financial Services (EPFS)
Appendix 502-1 Examples of Activities Performed by an Operator of a
Payment System (OPS)
Appendix 502-2 Application for Registration as Operator of a Payment
System (OPS)
Appendix 503-1 Guidelines on Application for Merchant Acquisition
License
Appendix 503-2 Statistics Related to Merchant Payment Acceptance
Activities (MPAA)
Appendix 503-3 Notice to the Bangko Sentral of Significant Changes
Appendix 503-4 Notice of Change in the Average Monthly Value of
Collected Funds Transferred to Merchants Resulting to a
Change in Category of License
Appendix 503-5 Notice to the Bangko Sentral of Engagement in
Merchant Acquisition
Appendix 1401-1 Participation Requirements and Procedure
Appendix 1401-2 Cessation of Participation in the RTGS PS through
Voluntary Withdrawal
Appendix 1401-3 Procedure for Manual Settlements

Appendix 1401-4 INTRADAY SETTLEMENT FACILITY

96
 Appendix 102-1

Applicability of Principles for Financial Market Infrastructures

(PFMI)1 to Designated Payment Systems2 (DPS)

Principle SIPS3 PIPS4

General Organization
Principle No. 1 – Legal Basis
A DPS should have a well-founded, clear,
transparent, a n d enforceable legal basis for each
material aspect of its activities in all relevant
jurisdictions.
Principle No. 2 – Governance
A DPS should have governance arrangements that
are clear and transparent, promote the safety and
efficiency of the DPS, and support the stability of
the broader financial system, other relevant
public interest considerations. and the
objectives of relevant stakeholders.
Principle No. 3 – Framework for the
comprehensive management of risks
A DPS should have a sound risk-management
framework for comprehensively managing legal.
Credit, liquidity, operational, and other risks.

Credit & Liquidity Risk Management

Principle No. 4 – Credit risk
A DPS should effectively measure, monitor, and
manage its credit exposures to participants and
those arising from its payment, clearing, and
settlement processes.
Principle No. 5 – Collateral
A DPS that requires collateral to manage its or its
participants' credit exposure should accept
collateral with low credit, liquidity, and market
risks. A DPS should also set and enforce
appropriately conservative haircuts and
concentration limits.

1
International standards for financial market infrastructures. i.e.. payment systems. central securities
depositories. securities settlement systems, central counterparties and trade repositories. issued by the
Committee on Payments and Market Infrastructures (CPMI) and the International Organization of
Securities Commissions (IOSCO) in April 2012
2
A payment system may be designated by the Bangko Sentral either as a: (1) Systemically Important
Payment System (SIPS). or (2) Prominently Important Payment System (PIPS) pursuant to the Payment
System Oversight Framework and the National Payment Systems Act.
3
Principles for mandatory adoption of Systemically Important Payment System (SIPS).
4
Principles for mandatory adoption of Prominently Important Payment System (PIPS). Key considerations
for principles not requiring mandatory adoption may be considered by the Bangko Sentral in holistically
assessing the principles for mandatory adoption.
97
 Principle SIPS3 PIPS4
Principle No. 7 – Liquidity risk
A DPS should effectively measure, monitor, and
manage its liquidity risk. A DPS should maintain
sufficient liquid resources in all relevant
currencies to effect same-day and, where
appropriate, intraday and multiday settlement of
payment obligations with a high degree of
confidence under a wide range of potential stress
scenarios that should include, but not be limited
to, the default of the participant and its affiliates
that would generate the largest aggregate
liquidity obligation in the DPS in extreme but
plausible market conditions.
Settlement
Principle No. 8 – Settlement Finality
A DPS should provide clear and certain final
settlement. at a minimum by the end of the value
date.
Principle No. 9 – Money Settlements
A DPS should conduct its money settlements in
central bank money where practical and
available.
Principle No. 12 - Exchange-of-value settlement
systems
If a DPS settles transactions that involve the
settlement of two linked obligations (e.g.,
securities or foreign exchange transactions), it
should eliminate principal risk by conditioning
the final settlement of one obligation upon the
final settlement of the other.

Default Management
Principle No. 13 - Participant-default rules and
procedures
A DPS should have effective and clearly defined
rules and procedures to manage a participant
default.
General Business & Operational Risk Management
Principle No. 15 – General business risk
A DPS participant should identify, monitor, and
manage its general business risk and hold
sufficient liquid net assets funded by equity to
cover potential general business losses so that it
can continue operations and services as a going
concern if those losses materialize.
Principle No. 16 – Custody and investment risks
A DPS should safeguard its own and its participants·
98
 Principle SIPS3 PIPS4
assets and minimize the risk of loss on and delay in
access to these assets.
Principle No. 17 – Operational risk
A DPS should identify the plausible sources of
operational risk, both internal and external, and
mitigate their impact through the use of
appropriate systems, policies, procedures, and
controls.
Access
Principle No. 18 – Access and participation
requirements
A DPS should have objective, risk-based, and
publicly disclosed criteria for participation, which
permit fair and open access.
Principle No. 19 – Tiered participation arrangements
A DPS should identify, monitor. and manage the
material risks to the DPS arising from tiered
participation arrangements.
Efficiency
Principle No. 21 – Efficiency and Effectiveness
A DPS should be efficient and effective in
meeting the requirements of its participants and
the markets it serves.
Principle No. 22 – Communication procedures and
standards
A DPS should use, or at a minimum
accommodate relevant internationally accepted
communication procedures and standards in
order to facilitate efficient payment. clearing,
settlement, and recording.
Transparency
Principle No. 23 – Disclosure of rules, key
procedures, and market data
A DPS should have clear and comprehensive
rules and procedures and should provide
sufficient information to enable participants to
have an accurate understanding of the risks, fees,
and other material costs they incur by
participating in the DPS. All relevant rules and
key procedures should be publicly disclosed.
Total No. of Principles 18 14

99
 Appendix 102-2

BANGKO SENTRAL ASSESSMENT METHODOLOGY

AND RATING FRAMEWORK

The Bangko Sentral shall adopt the PFMI assessment

methodology1 (AM) to evaluate the observance of the relevant
principles by a designated payment system (DPS) as well as
identify possible risks and induce changes in the national
payment system (NPS). In line with this, the Bangko Sentral shall
also utilize the pertinent AM's rating scale and language in
communicating the assessment against the relevant principles
identified in Appendix 102-1:

Rating Scale2 Description

Observed The DPS observes the principle. Any identified
gaps and shortcomings are not issues of
concern and are minor, manageable. and of a
nature that the DPS could consider taking up in
the normal course of its business.
Broadly The DPS broadly observes the principle. One or
Observed more issues of concern have been identified
that the DPS is enjoined to address and follow
up to better manage risks or improve
operations. The DPS should pursue such
improvements in a defined timeline.
Partly The DPS partly observes the principle. The
Observed assessment has identified one or more issues of
concern that could become serious if not
addressed in a timely manner. The DPS should
accord a high priority to address these issues.
Not Observed The DPS does not observe the principle. The
assessment has identified one or more serious
issues of concern that warrant immediate action.
Therefore, the DPS must accord the highest
priority to address these issues in a timely
manner.
Not Applicable The principle does not pertain to the type of DPS
being assessed because of the particular legal,
institutional, structural, or other characteristics
of the DPS.

1
As set forth in the Principles for Financial Market Infrastructures, Bank for International Settlements (BIS)
and IOSCO, 2012.
2
The rating scale is built on the gravity and urgency to remedy identified "issues of concern." For the
purpose of this scale, an "issue of concern" is a risk management flaw, a deficiency or lack of transparency
or effectiveness that needs to be addressed.
100
 Appendix 201-1

NATIONAL RETAIL PAYMENT SYSTEM (NRPS) FRAMEWORK

A. NRPS Framework

The NRPS is a policy and regulatory framework that aims to establish

a safe, efficient, and reliable electronic retail payment system in the
Philippines. Given that retail payment systems contribute to the stability and
efficiency of the financial system as a whole, the attainment of the NRPS
vision will help achieve higher economic growth and enhance overall
competitiveness of our economy.

With the rapid evolution of retail payments due to advancements in

technology, retail payments related activities of Bangko Sentral ng Pilipinas
Supervised Financial Institutions (BSFIs) introduced a complex interplay of
different types of risks. Thus, while the Bangko Sentral promotes the
modernization of the country’s retail payment system in accordance with the
NRPS Framework, it is critical to ensure that enabling policies and a
multifaceted approach to strengthening risk management are timely
adopted, and greater attention is devoted to retail payments activities of
BSFIs such as clearing and settlement.

In carrying out these activities, BSFIs are expected to adhere to the

NRPS Framework and measures aimed at strengthening risk management
as set forth in Section 201 of the MORPS and this Appendix. Hence, the retail
payment system and activities that BSFIs participate in should establish the
following:

a. Strengthened risk management through a better, holistic and multi-

stakeholder approach to governance, and an enhanced transparency of
clearing and settlement transactions classified according to risk profile.
b. Augmented efficiencies and effectiveness in the retail payment system by
minimizing duplicative efforts, promoting interoperability among retail
payment system participants, standardizing clearing and settlement
rules, and harmonizing various initiatives towards the achievement of the
shared goals of safe, reliable and efficient retail payment system.
c. Continued compliance with Bangko Sentral rules and regulations
particularly on information technology, consumer protection, and anti-
money laundering/combating the financing of terrorism (AML/CFT)

Retail payments under the NRPS Framework are payments that meet
at least one of the following characteristics: (i) the payment is not directly
related to a financial market transaction; (ii) the settlement is not time-
critical; (iii) the payer, the payee, or both are individuals or non-financial
organizations; and (iv) either the payer, the payee, or both are not direct
participants in the payment system that is processing the payment. This
definition of retail payment includes person-to-person, person-to-business,
business-to-person, business-to-business, person/business-to-government,

101
and government-to-person/business payments.1 On the other hand, large-
value payments refer to payments, generally of very large amounts, which are
mainly exchanged between banks or between participants of financial
markets and that usually require urgent and timely settlement.

The Bangko Sentral, as a central bank, generally plays a variety of

essential roles in the payment system by being an operator of the real-time
gross settlement system (RTGS), an overseer in core payment arrangements,
a user and participant of payment services, and, most critically, a catalyst for
payment system reform. It is through the performance of these roles that the
Bangko Sentral seeks to acquire a broader and holistic perspective on the
role and the status of the payment system in the financial system and the
economy in accordance with one of the pillars of central banking of
promoting safe and efficient payment systems in the country.

a. Key Principles
(1) Governance of the payment system shall be separate and distinct from
the actual clearing operations to enable the retail payment system
participants to effectively and efficiently deploy resources to focused
and specialized activities. The governance of the payment system
includes the establishment and implementation of standards and
rules among payment system participants.
(2) Sound governance shall be performed by an industry-led self-
governing body that is duly recognized and overseen by the Bangko
Sentral.
(3) All qualified BSFIs may apply to be direct clearing participants and, as
such, participate in the governance structure.
(4) All clearing participants shall subscribe to and comply with the PSMB-
formulated principles, policies, and business rules that will govern the
payments system.
(5) All clearing shall be done within the NRPS governance structure.
Bilateral clearing arrangements outside of the NRPS governance
structure are considered as undertakings that carry risks that cannot
be identified, measured, monitored and/or controlled, nor can said
undertakings be properly considered in attaining a holistic
perspective and improving governance of the retail payment system.
Hence, bilateral arrangements outside of the NRPS governance
structure shall not be allowed and failure to comply therewith shall
result in deployment of appropriate supervisory actions from the
Bangko Sentral.
(6) All significant retail payment streams shall be covered by an ACH.
(7) Non-discriminatory participation shall be espoused in the retail
payment system by allowing all qualified direct clearing participants
to participate in the formulation of standards and rules, as well as
participate in business arrangements.
(8) A reasonable market-based and transparent pricing mechanism shall
be adopted by all BSFIs which are clearing participants. Reasonable
service fees shall be allowed only for actual services rendered directly

1
Developing a comprehensive National Retail Payments Strategy, Financial Infrastructure Systems Policy
and Research, World Bank, October 2012
102
 related to the delivery of Electronic Payment and Financial Services to
clients of a BSFI.
(9) Bangko Sentral policies and supervisory actions, not directly involving
payments governance within the scope of the PSMB, shall be
addressed directly to the individual payment system participants as
BSFIs.

b. Objectives:
(1) To enable effective and efficient interface and interoperability using
shared and resilient infrastructure;
(2) To foster innovation and new business models;
(3) To promote fair access and competition amongst NRPS participants;
(4) To facilitate the provision of a wide range of payment products and
services with needed certainty, affordability (based on a reasonable
market-based pricing methodology) and trust; and
(5) To make relevant information on retail payment system available to
concerned stakeholders.

The NRPS Framework espouses the cooperation of different competitors,

or what is known as “coopetition”, in the domestic retail payments by
delineating areas to be covered between the cooperative and the
competitive spheres.

It is recognized that certain areas are dedicated for cooperation and

collaboration among BSFIs participating in the retail payment system
towards the common goals of safety, efficiency, reliability and resiliency. This
cooperative sphere centers on the clearing and settlement activities of BSFIs
which shall collaborate through the formulation and implementation of
clearing and settlement standards, rules, and agreements under a formal
governance structure that conforms to the NRPS principles.

To complement the cooperative sphere is the competitive sphere where

the NRPS principles promote competition through innovation in the delivery
of quality and cost-effective financial products and services, the creation of
new business models customized to the needs of target consumers, and the
development of services with a higher level of security, among others. The
competitive sphere shall be governed by reasonable, transparent and
effective consumer pricing mechanisms to allow BSFIs cost-recovery and fair
financial returns. Each BSFI shall be responsible for prescribing its pricing
mechanisms for its financial products and services taking into consideration,
among others, the nature of the product or service, the market segment to
be served and the costs incurred to provide such product or service.

B. Governance - Payment System Management Body (PSMB)

The PSMB is an industry-led self-governing body that is duly recognized

and overseen by the Bangko Sentral.

To attain a holistic perspective and multi-stakeholder organized structure

that would bring about good governance in the retail payment system, BSFIs
shall adhere to the following key principles when engaging in clearing
activities and must do so only within the NRPS governance structure.
103
a. Key Principles
(1) The retail payment transactions covered under the NRPS governance
structure shall be as follows:
(a) For card-based instruments, the card shall be both issued and
acquired locally; and
(b) For online, mobile, or other electronic payment
instructions/instruments, the account of payer (sender) and
account of payee (recipient) shall be both maintained with BSFIs
that are licensed to offer EPFS.
(2) The PSMB shall be a not-for-profit juridical entity.
(3) The PSMB shall adopt a Charter in consultation with the Bangko
Sentral.
(4) The PSMB membership criteria shall, at all times, be consistent with
the NRPS Framework and Bangko Sentral regulations, in addition to
the following principles:
(a) All qualified direct clearing participants should be members of the
PSMB.
(b) To be a PSMB member, a BSFI shall be a participant in at least one
(1) ACH and actively participate in an ACH within one (1) month of
joining the PSMB.
(c) Each PSMB member shall be entitled to only one (1) vote.
(5) The PSMB shall be funded by the members on an agreed basis.
(6) The PSMB shall be governed by a PSMB board which shall observe the
following principles:
(a) The PSMB board shall have multi-stakeholder representation in
accordance with the volume of the risk-taking activities, such as
clearing volume, within a specified time frame [e.g. immediately
preceding twenty-four (24) months]. The basis for computing the
clearing volume across all ACHs or payment streams shall include
all payment streams with clearing activities as of the date when
the election of the PSMB board is called, except if a valid reason is
shown to limit the parameters.
(b) The PSMB board shall also abide by sound corporate governance
practices which may include, but is not limited to, allocating seat/s
for independent board member/s or board member/s that
represent/s the broader public interest and has/have competence
and experience in the payments field.
(c) The PSMB board members shall appoint as official representative
their chief executive officer (CEO) and designate a formal alternate
who can act with full authority (e.g., voting, approval, decision-
making, and others).
(d) Each PSMB board member shall have one (1) vote.
(e) No two (2) PSMB board members shall come from the same group
of companies where one is majority-owned or controlled by the
other company.
(f) The Chairperson shall be elected among PSMB board members
and shall not serve for two (2) successive terms.
(7) The PSMB shall be independent from the clearing switch operator/s
with respect to business operations.
(8) All BSFIs that are part of the NRPS governance structure shall
subscribe to and comply with the PSMB-formulated principles,
policies, and business rules that will govern the payments system
104
 provided such PSMB-formulated principles, policies and business
rules are in conformity with the NRPS Framework and principles as
well as applicable laws and regulations.

b. Objectives
(1) The PSMB will provide sound governance to the retail payment system
and serve as a forum of collaboration for ensuring appropriate
conditions for retail payments in the country. Towards this end, the
PSMB will perform these functions with respect to its members:
(a) Ensure compliance by PSMB members with criteria, standards and
rules promulgated and adopted by the PSMB’s membership and
PSMB board, as applicable.
(b) Set policies and standards on clearing activities of PSMB members.
(c) Standardize retail clearing agreements across payment streams,
which may include minimum guideline on the content of service
level agreements with CSOs.
(d) Manage members’ conformance to multilateral retail clearing
agreements.
(e) Review applications for establishment of ACHs and to accordingly
approve the formation thereof to ensure, among others, that the
NRPS principle of a payment stream falling only under one (1) ACH
is observed by PSMB members.
(f) Prescribe policies and rules to promote visibility of retail clearing
and resulting settlement positions to manage risks resulting from
or associated with clearing and settlement activities.
(g) Set forth policies, rules and/or standards to ensure that no anti-
competitive activities occur in clearing operations of PSMB
members.
(h) Promote fair access to the payment system amongst PSMB
members.
(i) Enable effective and efficient interface and interoperability using
shared and resilient infrastructure.
(j) Establish a dispute resolution mechanism for PSMB members on
matters not covered or cannot be resolved under the ACH dispute
resolution framework.
(k) Provide a clearing environment that will support payments
innovation and the adoption of new business models by the
payment system participants.

C. Automated Clearing House (ACH)

The ACH is a multilateral legally binding agreement amongst clearing

participants. The ACH shall govern clearing and settlement determination.

To promote interoperability and standardize clearing and settlement

rules and procedures, BSFIs are expected to observe the following key
principles in forming and participating in ACHs under the NRPS governance
structure.

a. Key Principles

105
 (1) ACHs shall be created and differentiated based on payment streams,
which comprise of payment instruments or instructions, business
rules, clearing activities and risk considerations which are of similar
nature or which create similar risk profiles.
(2) A payment stream can fall under only one (1) ACH.
(3) The formation of and participation in an ACH shall be open to all
qualified clearing participants.
(4) The formation of an ACH shall be considered a business arrangement
to be agreed upon between participants of an ACH.
(5) An ACH shall engage the services of only one (1) clearing switch
operator.
(6) PSMB members may be part of more than one (1) ACH Participant
Group and/or participate in more than one (1) ACH, provided the PSMB
member meets the requirements for participating in such ACH.
(7) At least two (2) direct clearing participants can initiate the creation of
an ACH subject to the recognition of the PSMB Board, or in the
absence of a PSMB, the Bangko Sentral.

b. Salient Features
(1) ACH participants shall elect representatives to an ACH Participant
Group, which once recognized by the PSMB, shall draw up and
implement ACH rules and agreements and contract a qualified
clearing switch operator. To assist in drafting the ACH agreements, the
Participant Group may nominate a Working Group to formulate draft
agreements subject to the former’s approval.
(2) The assignment of a new ACH to an existing or new ACH Participant
Group shall be approved by the PSMB Board.
(3) Where a new ACH Participant Group has to be formed, it shall be
recognized by the PSMB Board once its charter has been accepted by
the ACH participants and meets the PSMB criteria for an ACH
Participant Group.

d. Clearing Switch Operator (CSO)

The CSO provides clearing switch services.

To augment efficiencies in the retail payment system while ensuring a

robust and resilient infrastructure underlying retail payment transactions of
BSFIs, BSFIs should observe the following key principles in engaging the
services of CSOs relative to the delivery of a retail payment product or service
within the NRPS governance structure.

c. Key Principles
(1) The operations of the CSO that services an ACH shall be limited to the
provision of clearing and other services that do not compete with
services offered by BSFIs participating in the ACH.
(2) Clearing switch operations shall be conducted effectively and
efficiently consistent with international standards as this is a critical
prerequisite for the functioning of all the various systems supporting
and underlying retail payment services.

106
(3) The CSO shall have a reliable, resilient, robust, and secure
infrastructure to ensure consistency and continuity of services under
different operating conditions.
(4) The CSO shall be a duly licensed entity in the Philippines. Entities
organized under the laws of countries other than the Philippines shall
secure a license to do business in the Philippines and comply with the
Foreign Investments Act of 1991 as well as other applicable laws and
regulations.
(5) A CSO can extend service to multiple ACHs.
(6) Each ACH, through their designated CSO, shall individually settle their
clearing results through the RTGS system operated by the Bangko
Sentral

107
 Appendix 401-1

REQUIRED CERTIFICATIONS AND SUPPORTING DOCUMENTS FOR THE

CONFIRMATION OF THE ELECTION/APPOINTMENT OF
DIRECTORS/OFFICERS
(Appendix to Section 401.11 on Confirmation of Election/Appointment of
Directors and Officers)

Chief Executive Officers and Other

Directors Officers enumerated in Section
401.111
• Letter-request for Bangko • Letter-request for Bangko
Sentral confirmation signed Sentral confirmation signed
by an authorized officer2 with by an authorized officer with
an affirmative statement an affirmative statement
that the institution has that the institution has
conducted fit and proper test conducted fit and proper test
on the director/s concerned on the officer/s concerned.
• Secretary's Certificate • Secretary's Certificate
attesting to the resolution of attesting to the resolution of
the stockholders or board of the stockholders or board of
directors approving the directors approving the
election appointment
• Bio-data with a photograph • Bio-data with a photograph
(2" x2") taken within the last (2" x2") taken within the last
six (6) months six (6) months
• Certification under oath of • Certification under oath of
the director concerned that the officer concerned that
he/she possesses all the he/she possesses all the
qualifications and none of qualifications and none of
the disqualifications to the disqualifications to
become a director become an officer
• Duly accomplished and • Duly accomplished and
notarized authorization form notarized authorization form
for querying the Bangko for querying the Bangko
Sentral watchlist file from Sentral watchlist file from
the director concerned per the officer concerned per
Appendix 401-3 Appendix 401-3
• Certification under oath of
compliance with Bangko
Sentral-prescribed syllabus
on corporate governance

1
E.g., Heads of internal Audit, risk management and compliance functions and other officers with rank of
senior vice-president and above (or equivalent ranks) of an OOPS.
2
Authorized signatory is the Chief Executive Officer (CEO) of the institution, except for appointments of
CEOs, in which case the authorized signatory shall be the Chairman of the Corporate Governance
Committee or of the board of directors, as may be applicable.
108
 orientation program

• Certification under oath of • Brief description of the

that the director has received officer's duties and
copies of the general responsibilities
responsibility and specific
duties and responsibilities of
the board of directors and of
a director that he/she fully
understands and accepts the
same
• For independent directors, • For foreigners appointed as
certification under oath that officers, Alien Employment
he/she is an independent Permit issued by the
director defined in Bangko Department of Labor and
Sentral regulations Employment
• For re-elected directors,
Secretary's Certificate on the
attendance by the director
concerned to the board
meetings held for the last
twelve (12) months covering
the term of service,
indicating percentage of
attendance to board
meetings

109
 Appendix 401-2

Appendix to Section 401.11 on Bio-data of Directors and Officers

DEADLINE: 20 business days from the annual election of the board

of directors/trustees
SUBMISSION: Original copy to the appropriate oversight department of
the Bangko Sentral

(Name of Operator of Payment System)

List of Members of the Board of Directors and Officers
As of ____________________________

Name Position Department (if

applicable)
Directors:

Officers with rank of senior vice-

president and above (or equivalent
rank):

Officers below the rank of senior vice

president:

REPUBLIC OF THE PHILIPPINES

(___________) S.S.

I solemnly swear that all matters set forth in this report are true and
correct, to the best of my knowledge and belief.

(Signature of Authorized Signatory)

SUBSCRIBED AND SWORN TO BEFORE ME this _____day of_20_,

affiant exhibiting to me his/her (valid identification document) No._ issued
at_____on__________________20___.

Notary Public
Until December 31, 20___
PTRNo. _______________
Place _______________
Doc No.______

Page No. _____

Book No.___
Series of_______

110
 Appendix 401-3

AUTHORIZATION FORM FOR QUERYING THE BANGKO SENTRAL RECORDS FOR

SCREENING APPLICANTS AND CONFIRMING APPOINTMENTS OF DIRECTORS
AND OFFICIALS
(Appendix to Section 401.8 on Watchlisting)

AUTHORIZATION

I, ________________________after being sworn in accordance with law, do

hereby authorize the following, pursuant to the provisions of 401.8 of the Manual
of Regulations for Payment Systems (MORPS):

a. (Name of Operator of Payment System), to conduct a background

investigation on myself relative to my application for or appointment to
the position of (position) in (Name of Operator of Payment System) which
includes, among others, inquiring from the Watchlist Files of the Bangko
Sentral; and

b. The Bangko Sentral to disclose its findings pertinent to the

aforementioned inquiry on its records, including the Watchlist Files to
(Name of Operator of Payment System).

With the above authorization, I hereby waive my right to the confidentiality

of the information that will be obtained as a result of the said inquiry, provided
that disclosure of said information will be limited for the purpose of ascertaining
my qualification or non-qualification for the said position.

IN WITNESS WHEREOF, I have here unto set my hand this (Date of Undertaking).

(Signature Over Printed Name)

SIGNED IN THE PRESENCE OF:

WITNESS WITNESS

111
 Appendix 401-3

ACKNOWLEDGMENT

REPUBLIC OF THE PHILIPPINES}

______CITY }

BEFORE ME, this _______ day of ________20_ in _________ personally

appeared the following person:

Name Community Tax Place Date

Certificate

known to me to be the same person who executed the foregoing instrument and
he acknowledged to me to be the same person who executed the foregoing
instrument and he acknowledged to me that the same is his free act and deed.

This instrument, consisting of two (2) pages, including the page on which
this acknowledgment is written, has been signed on the left margin of each and
every page thereof by _____, and his witnesses, and sealed with my notarial seal.

IN WITNESS WHEREOF, I have here unto set my hand, the day, year and
place above written.

Notary Public

Doc. No.: __________

Page No.: __________
Book No.: __________
Series of 2 __________

112
 Appendix 501-1

GUIDELINES ON LICENSING OF ELECTRONIC PAYMENT AND FINANCIAL

SERVICES (EPFS)

A BSFI intending to provide EPFS shall comply with the following

requirements in conjunction with the Guidelines on the Granting of
License/Authority provided in Appendix 124 of the MORB and Appendix N-
14 of the MORNBFI.

a. Advanced EPFS

A BSFI that offers advanced EPFS shall undergo the licensing process and
provide the documentary requirements, as follows:

Processing and Documentary Requirements Type A1 Type B2

(1) Eligibility Test and Self-Assessment

A BSFI must conduct a self-assessment vis-à-vis

the defined prudential criteria described in Section 111
of MORB and Section 101-N of the MORNBFI (Prudential
Criteria)

Should the BSFI meet the prudential criteria, it

shall submit a letter of intent with a certification signed
by its president or officer of equivalent rank, and chief
compliance officer (CCO) stating that the BSFI satisfies
said requirements.

If the Bangko Sentral concurs with the certification,

the BSFI shall receive a confirmation of eligibility (COE)
to offer EPFS.
(2) Application for the license

The BSFI shall formally submit the following

application documents to the appropriate department
of the Bangko Sentral within six (6) months from the
date of the COE.

1
This applies to BSFIs that can be assessed against the prudential criteria provided in the Policy and
Regulations on Licensing. These applicants must have been examined by the Bangko Sentral.
2
This applies to proponents that cannot be assessed against the prudential criteria provided in the Policy
and Regulations on Licensing. These include newly-established BSFIs and new applicants for an authority
to operate as “Electronic Money Issuer-Others”.

113
Processing and Documentary Requirements Type A1 Type B2
(a) Application letter signed by the president or
officer of equivalent rank specifically indicating
the justification/reason for the application to
provide EPFS
(b) Notarized Secretary’s Certificate (or equivalent
document in the case of foreign bank
branches) attesting that the Board of Directors
(or equivalent management committee in the
case of foreign bank branches) has approved
the application to provide EPFS
(c) Certification signed by the president (or office
of equivalent rank) and the CCO to the effect
that the BSFI has met the following minimum
pre-conditions:

(i) An adequate risk management process is

in place to identify, assess, monitor, and
control the risks arising from the proposed
EPFS;
(ii) Appropriate policies and procedures in the
following areas have been adopted to
address all security risks and concerns
affecting the EPFS platform and
application system/s:
• Authentication - establishes the
identity of both the sender and the
receiver; uses trusted third parties that
verify identities in cyberspace;
• Non-repudiation - ensures that
transactions cannot be repudiated or
presents undeniable proof of
participation by both the sender and
the receiver in a transaction;
• Authorization - establishes and enforces
the access rights of entities (both
persons and/or devices) to specified
computing resources and application
functions; also locks out unauthorized
entities from physical and logical
access to the secured systems;
• Integrity - assures that data has not been
altered;
• Confidentiality - assures that no one
except the sender and the receiver of
the data can gain access to clear data;
and
• Availability - assures that the system is
operating properly during the time it is
expected to be available;
(iii) The EPFS system has been tested prior to
114
Processing and Documentary Requirements Type A1 Type B2
its implementation and that the test
results are satisfactory. As a minimum
standard, appropriate system testing and
user acceptance testing should have been
conducted; and
(iv) A documented business continuity
planning process covering EPFS, among
other areas of operation, has been
adopted.

(d) Details of the features and functionalities of the

proposed EPFS, including the security controls
and measures
(e) Process flow/brief narration of how transaction
and data flow through the network

(f) Diagram of the configuration of the system

supporting the proposed EPFS, showing the
linkage between the host systems and
network infrastructure
(g) Pro-forma client application form and terms and
conditions for the availment of and/or use of the
EPFS
(h) Brief discussion of the following topics in
relation to the particular EPFS being applied for:
• Oversight management process;
• Business continuity plan/disaster recovery
plan;
• Incident response/problem management;
• Consumer protection/awareness program;
and
• Information security polices and security
features of the proposed EPFS
(i) Results of the user acceptance test (UAT)

(j) Report on the independent assessment on the

proposed EPFS, if applicable.

(k) Articles of Incorporation/By-Laws of the BSFI

(l) Photocopy of the marketing materials for the

proposed EPFS

(m) Pro-forma agreements with accredited

agents for the delivery/issuance of EPFS;

(n) Anti-Money Laundering (AML) Policy/Manual of

Procedures; and

115
Processing and Documentary Requirements Type A1 Type B2
(o) Latest Audited/Interim Financial Statements

116
b. Basic EPFS

The BSFI shall notify the appropriate department of the Financial

Supervision Sector (FSS) by submitting the following documents 30 days prior
to the launch/implementation of its EPFS:

(1) Notification letter signed by the institution's president or officer of

equivalent rank;
(2) Details of the features and functionalities of the EPFS, including
security controls and measures adopted relative to the offering of the
EPFS; and
(3) Process flow/brief narration of how transaction and data flow through
the network including the clearing switch in case the service involves
participation in an Automated Clearing House (ACH).

c. Fees

A BSFI applying for an advanced EPFS shall pay processing and licensing
fees as shown below:

Classification
Banks Non-banks
Type of Universal Other
Fee and Thrift Rural EMI- Financial
Commercial Banks and Coop. Others Inst.
Banks Bank
Processing 50,000 20,000 10,000 20,000 10,000

Licensing 100,000 60,000 25,000 60,000 25,000

The assessment and collection of fees shall be made in accordance with

the guidelines on fees provided in Appendix 124 of the MORB.

117
 Attachment 501-1

<Name of BSFI>
CERTIFICATION ON
COMPLIANCE WITH THE CONDITIONS FOR
PARTICIPATION IN AN AUTOMATED CLEARING HOUSE

We, <Name of Officer>, President (or Officer of Equivalent Rank) and

<Name of Officer>, Compliance Officer, on behalf of the <Name of BSFI>, with
head/principal office address at <complete address of Head/Principal Office>, after
having been duly sworn to in accordance with law, hereby certify to the best of our
knowledge, that <Name of BSFI>:

a Has satisfactorily met the prudential criteria provided under Sec. 111 of
MORB and Section 101-N of the MORNBFI (Prudential criteria);

b Obtained a satisfactory assessment in the areas of Information Technology

(IT), Anti-Money Laundering (AML), and Consumer Protection, as applicable,
in the last examination conducted by the Bangko Sentral; and

c. Is capable of complying with the specific rules applicable to transactions

performed under the National Retail Payment System Framework as
provided in Sec. 201.4 (Specific rules applicable to transactions
performed under the NRPS Framework).

We certify further that <Name of BSFI>, as a BSFI licensed to offer electronic

payment and financial services (EPFS), has complied with the provisions under Sec.
501 detailed further in Appendix 501-1 (Guidelines on Licensing of Electronic Payment
and Financial Services).

We also certify that all relevant documents in support of the foregoing

statements are kept on file and are readily available for verification by examiners of
the Bangko Sentral during onsite verification/examination or when a written
request is made to verify compliance.

This certification executed on <date of execution> is being submitted in

compliance with the requirements of the Bangko Sentral.

Signed: Signed:

Name of President Name

President (or Officer of Equivalent Compliance Officer
Rank)

SUBSCRIBED AND SWORN to before me, this day of _________

at _______________, with affiant exhibiting their valid identifications indicated below:

Name Government ID/Passport No. Date/Place Issued

Notary Public

118
 Attachment 501-2

<Name of BSFI>

CERTIFICATION ON
THE RE-REGISTRATION OF
ELECTRONIC PAYMENT & FINANCIAL SERVICES

We, <Name of Officer>, President (or Officer of Equivalent Rank) and <Name
of Officer>, Compliance Officer, on behalf of the <Name of BSFI> with
head/principal office address at <complete address of Head/Principal Office>, after
having been duly sworn to in accordance with law, hereby certify that to the best of
our knowledge, all the information contained in the attached documents
supporting the institution's re-registration for electronic payment and financial
services (EPFS) are hereby true and correct.

We certify further that <name of BSFI> complies with the provisions under
Section 501 (Documentary requirements) except for: <enumerate provisions that
have not yet been complied with>. Aforementioned provision/s shall be complied
by <target date for compliance>.

We also certify that all relevant documents in support of the EPFS activities
and operations are kept on file and are readily available for verification by examiners
of the Bangko Sentral during onsite verification/examination or when a written
request is made to determine compliance.

This certification executed on <date of execution> is being submitted in

compliance with the requirements provided in the BSP Circular No.

Signed: Signed:

Name of President Name

President (or Officer of Equivalent Compliance Officer
Rank)

SUBSCRIBED AND SWORN to before me, this day of ________

at _______________, with affiant exhibiting their valid identifications indicated below:

Name Government ID/Passport No. Date/Place Issued

Notary Public

Not. Reg. No.

Doc. No.
Page No.
Series of

119
 Appendix 502-1

Examples of Activities Performed by an Operator of a Payment System

Maintains the platform that enables payments or fund transfers, regardless of

whether the source and destination accounts are maintained with the same or
different institutions

• Owns or operates a computer application system that enables payments or

fund transfers
• Sets rules by which payments may be made or funds may be transferred
• Allows customers to fund their accounts by submitting to the operator cash
or its equivalent in exchange for the value to be stored in their account
• Allows accounts of system users to be linked to their accounts with other
financial institutions (FIs) (e.g., deposit account, e-money account, credit card
account)

Operates the system or network that enables payments or fund transfers to be

made through the use of a payment instrument

• Provides a system or network infrastructure that enables payments and

financial services of FIs
• Sets rules, functions, procedures, arrangements or devices that enable an
account holder or holder of the payment instrument to transact with a third
party
• Transfers payment information (e.g., card transaction details) to and from
participating institutions
• Provides network participants with a listing of the amounts due to/from
other participants
• Offers service/s to more than one (1) FI and enables them to perform
payments or fund transfers among each other
• Enables the acceptance of specific payment instrument/s by institutions
such as government, commercial establishments, and other
merchants/billers

Provides a system that processes payments on behalf of any person or the

government

• Receives payment for or on behalf of the sellers of goods, providers of services,

or creditors/billers in accordance with a written agreement
• Sets rules, provides arrangements or facilities to collect funds from the public
and transmits the same to sellers of goods, providers of services, or
creditors/billers in accordance with a written agreement
• Allows payments to be made to more than one commercial establishment
or creditor/biller

120
 Appendix 502-2

Application for Registration as Operator of a Payment System (OPS)

121
122
 Guidelines on Application for Merchant Acquisition License

An OPS–MPAA intending to engage in merchant acquisition shall comply with the

following requirements:

a. Documentary requirements:
1. Application for Registration as Operator of Payment System (OPS)
(Appendix 502-2) signed by the president, chief executive officer,
or a senior officer holding an equivalent position;
2. Proof of financial capacity
i. For New Entity: Treasurer’s Affidavit supported by proof of
payment of subscribed capital (for partnerships,
corporations, and cooperatives) or Bank Certification (for
sole proprietorship)
ii. For Existing Entity: Latest Audited Financial Statement and
Latest Interim Balance Sheet signed by the
Owner/Managing Partner/President
3. Copy of Certificate of registration from the Department of Trade
and Industry (DTI), Securities and Exchange Commission (SEC) or
Cooperative Development Authority (CDA), as applicable;
4. Copy of the business registration/permit indicating the line of
business of the OPS, from the city or municipality that has
territorial jurisdiction over the place of establishment and
operation of the OPS for the current period;
5. Documentary requirements in compliance with the Governance
Policy for OPS as stated in Section 401 of the MORPS;
6. Organizational structure;
7. Business plan, including but not limited to a description of
business model, target markets, payment services/products
offered to merchants, payment settlement process/ procedures
with corresponding process flow/s;
8. Risk management policies and procedures covering but not
limited to the following critical areas: Information Technology,
Information Security, Business Continuity and Operational Risk
Management;
9. Merchant management policies and procedures, including due
diligence and approval criteria, onboarding and monitoring;
10. Document/information on merchant protection, particularly
redress mechanism;
11. Expected average monthly value of collected funds to be
transferred to merchants in the applicable period;
12. Templates of agreements/contracts with merchants, settlement
banks, third party providers and other entities that are necessary
in the provision of merchant acquisition service, as applicable;
13. List of settlement banks, third party providers and other entities
that are necessary in the provision of merchant acquisition
service, as applicable; and
14. Schedule of fees and/or charges.

An OPS-MPAA already registered with the Bangko Sentral as OPS need

not submit items a(1)-(5) above if the information from previously
submitted documents during registration remain the same.
123
 Applications with incomplete documentation will be returned without
prejudice to re-submission of a complete application and collection of
applicable fees.

The Bangko Sentral may request information and/or documents aside

from the minimum documentary requirements prescribed above to
arrive at an informed decision. It may also conduct limited inspection or
validation, when warranted.

The Bangko Sentral may approve any application of an eligible applicant

after evaluating the application and considering relevant factors.
Likewise, the Bangko Sentral may deny applications if (a) significant
supervisory or compliance concerns exist, or (b) the applicants fail to
provide material information necessary to make an informed decision.

b. Application fees. An applicant, depending on its classification, shall be

assessed the following fees per application:

i. Filing fee – shall be charged upon filing of an application and is non-

refundable. In case of re-submission of application that is returned for
incomplete documentation, another filing fee shall be charged anew;
and

ii. License fee – shall be charged to certain application upon approval.

Assessed fees shall be paid to the Bangko Sentral as follows:

Type of Fee Category

A B
Filing ₱10,000.00 ₱20,000.00
License ₱25,000.00 ₱60,000.00

c. Post Decision. Unless otherwise prescribed by the Bangko Sentral, an

applicant may file a new application for a denied and/or withdrawn
application after the lapse of six (6) months from the date of denial/
withdrawal: Provided, That any weaknesses, deficiencies and/or non-
compliance with any laws, rules, regulations and/or directives that made
the applicants ineligible have already been satisfactorily addressed.

124
 Appendix 503-2

Statistics Related to Merchant Payment Acceptance Activities (MPAA)

Name of OPS-MPAA: __________________
Date: <End-Month, Year>
Payment Cards
Payment
Instructions
Cash Check Total
Debit Card (e.g. EFT, QR
(bank or e- Pre-paid Card Credit card code)
money) Others

Volu Valu Volu Volu Volu Volu Volu

Volume Value Value Volume Value Value Value Value Value
me e me me me me me
Transaction/Payment Instrument
A. Via electronic channel (internet, mobile, POS, mPos, ATM, 0.0
0 0.00 0 0.00 0 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00
CAM/Payment Kiosk) 0

i. Cash-in/deposit 0 0.00

ii. Cash-out/withdrawal 0 0.00

iii. Domestic fund transfer/remittance 0 0.00

iv. Cross-border transfers 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00

a. Inward 0 0.00

b. Outward 0 0.00

v. Bills payment 0 0.00

vi. Payment to merchants 0 0.00

vii. Payment to government 0 0.00

viii.
$1 Other 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00
a s:

- 0 0.00
0.0
0 0.00 0 0.00 0 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00
B. Via over-the-counter 0

i. Cash-in/deposit 0 0.00

ii. Cash-out/withdrawal 0 0.00

iii. Domestic fund transfer/remittance 0 0.00

iv. Cross-border transfers 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00

a. Inward 0 0.00

b. Outward 0 0.00

v. Bills payment 0 0.00

vi. Payment to merchants 0 0.00

vii. Payment to government 0 0.00

$ viii.
2 Other 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00
a s:

- 0 0.00

125
 0.0
0 0.00 0 0.00 0 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00
Total 0

Indicators Total

A. User Profile
i. Number of users/accounts
ii Number of active users
iii. Number of tie-ups with international scheme
iv. Number of users/accounts tied to international scheme
B. Number of terminals 0
i. POS
ii. mPos
iii. ATM
iv. CAM
v. Payment Kiosk
$1a vi. Others: 0

C. Number of agents 0
i. Direct agents
ii. Agents by virtue of partnership with other OPS
D. Number of billers/merchants 0
i. Direct billers/merchants 0
a. Government
b. Non-government
ii. Biller/Merchants by virtue of partnership with other OPS 0
a. Government
b. Non-government

No. of Billers
i. Settlement happens in less than 30 days
ii. Settlement happens between 31 to 60 days
iii. Settlement happens between 61 to 90 days
iv. Settlement happens between 91 to 180 days
v. Settlement happens after 180 days

126
 F. Availability Percentage
i. System Availability
ii. Network Availability
iii. Terminal Availability (Average)

G. Complaints Handling - No. of complaints received for the reference period

i. No. of complaints, beginning balance (unresolved from previous reference period)
ii. No. of complaints resolved within TAT
iii. No. of complaints resolved outside TAT
iv. No. of unresolved complaints as of end of reporting period
H. Fraud Management
i. No. of Fraud Incidents
ii. No. of Accounts/Customers Affected
$2a Minimum Fee Maximum Fee
-

i. Number of incidents (for the reference period)

ii. Number of incidents resolved (for the reference period)
iii. Total downtime due to the incidents
iv. Top 3 Incidents (for the reference period) - Nature of Incident Date of Occurrence Root Cause Resolution Impact
$3a 1
2
$3b 3

i. Number of incidents (for the reference period)

ii. Number of incidents resolved (for the reference period)
iii. Total downtime due to the incidents
iv. Top 3 Incidents (for the reference period) - Nature of Incident Date of Occurrence Root Cause Resolution Impact
$4a 1
2
$4b 3

127
List of Delisted Merchants

No. Name of Merchant Reason for Delisting Delisting Date

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

Note: Template of this report will be provided in Excel format.

128
 Appendix 503-3

Notice to the Bangko Sentral of Significant Changes

Pursuant to the requirement under Section 503 of the Manual of

Regulations for Payment Systems (MORPS), I, <Name of Officer>, <President or
Officer of Equivalent Rank>, on behalf of the <Name of OPS–MAL>, with
head/principal office address at <complete address of Head/Principal Office>,
notifies the Bangko Sentral of the following change/s in relation to merchant
payment acceptance activities as evidenced by the attached supporting
document/s:

<description of significant change/s>

I also certify that all relevant documents in support of this representation

are readily available for verification by the Bangko Sentral during onsite
verification/examination or when a written request is made to determine
compliance.

Signed:

Name of President/Officer of Equivalent

Rank
President/Equivalent Rank
Date:

129
 Appendix 503-4

Notice of Change in the Average Monthly Value of Collected Funds

Transferred to Merchants Resulting to a Change in Category of License

Pursuant to the requirement under Section 503 of the Manual of Regulations

for Payment Systems (MORPS), I, <Name of Officer>, <President or Officer of
Equivalent Rank>, on behalf of the <Name of OPS–MAL>, with head/principal
office address at <complete address of Head/Principal Office>, notifies the
Bangko Sentral of the change below in the average monthly value of collected
funds transferred to merchants in two (2) calendar years resulting to a change
in the category of license.

Reference Period Average Monthly Value of Collected

(Start and End Date) Funds Transferred to Merchants

Period of prior category: ₱

Calendar Year 1: ₱

Calendar Year 2: ₱

I also certify that all relevant documents in support of this representation are
readily available for verification by the Bangko Sentral during onsite
verification/examination or when a written request is made to determine
compliance.

Signed:

Name of President/Officer of Equivalent

Rank
President/Equivalent Rank
Date:

130
 Appendix 503-5

Notice to the Bangko Sentral of Engagement in Merchant Acquisition

I, <Name of Officer>, <President or Officer of Equivalent Rank>, on behalf

of the <Name of BSP-Supervised Financial Institution (BSFI)>, with
head/principal office address at <complete address of Head/Principal Office>,
notifies the Bangko Sentral of our engagement in merchant acquisition as
defined in Section 503 of the Manual of Regulations for Payment Systems
(MORPS) beginning <date of commencement> as evidenced by the attached
supporting document/s:

(1) Business plan, including but not limited to a description of business

model, target markets, payment services/products offered to merchants,
payment settlement process/ procedures with corresponding process
flow/s;
(2) Merchant management policies and procedures, including due diligence
and approval criteria, onboarding and monitoring;
(3) Document/information on merchant protection, particularly redress
mechanism;
(4) Average monthly value of collected funds to be transferred to merchants
in a twelve (12)-month period, augmented by expected average value if
the BSFI is operating for less than twelve (12) months;
(5) Templates of agreements/contracts with merchants, settlement banks,
third party providers and other entities that are necessary in the
engagement in merchant acquisition, as applicable;
(6) List of settlement banks, third party providers and other entities that are
necessary in the engagement in merchant acquisition, as applicable; and
(7) Schedule of fees and/or charges.

I also certify that all relevant documents in support of this representation are
readily available for verification by examiners of the Bangko Sentral during
onsite verification/examination or when a written request is made to determine
compliance.
Signed:

Name of President/Officer of Equivalent

Rank
President/Equivalent Rank
Date:

131
 Appendix 1401-1

Participation Requirements and Procedure51

a. The applicant shall submit the following documents52 in support of its

application for participation:

(1) Original copy of the following documents to be transmitted to:

The Director
Payments and Settlements Department (PSD)
Room 101, 5-Storey Building
Bangko Sentral ng Pilipinas
A. Mabini Street, Malate, 1004 Manila

(a) Application Letter;

(b) Signed and notarized Participation Agreement that defines the roles and
responsibilities of the Bangko Sentral and of the Participant;

(c) Virtual Private Network (VPN) Connectivity Registration Form53;

(d) Secretary’s Certificate attesting to the resolution of the applicant’s Board,

authorizing the institution to apply for participation in the RTGS PS,
providing the list of authorized officers/signatories, and certifying the
specimen signatures of these authorized officers/signatories; and

(2) Electronic submission of the scanned copies of the above documents is

allowed, provided that:
(a) such copies are accompanied by a duly accomplished Summary
Statement Form (SSF) and each page of said documents, including the
SSF, is certified by the applicant’s authorized officer;
(b) emailed with a subject in this format:
<Application>underscore<RTGSPS>underscore<Applicant’s
Acronym>underscore<type of submission>; and
(c) sent by a registered email sender to the Director, PSD at
RTGS@bsp.gov.ph.54

The Bangko Sentral may require supporting documents other than those
enumerated above.

b. Applications with complete documents shall be processed by the Bangko

Sentral. If the submission were incomplete or erroneous, the applicant shall
receive a Notice of Deferment of the processing of its application.

51
Applicable only to institutions applying to settle transactions through the RTGS PS
52
Templates posted on the Bangko Sentral website (www.bsp.gov.ph)
53
Connection using a leased line
54
Bangko Sentral Memorandum No. M-2020-070 dated 21 September 2020 (e-Submission of Documents to the
Payments and Settlements Office)

132
c. A successful applicant shall comply with the following requirements prior to the
activation of its account:

(1) Allow the Bangko Sentral to configure and test the Participant’s VPN
connectivity;
(2) Attend a briefing on the use of the RTGS PS Participant Browser to be
conducted by the Bangko Sentral; and
(3) Enroll its authorized user(s) by submitting the RTGS PS Participant Browser
User Account Form to the PSD.

d. The Bangko Sentral shall issue a non-transferrable Smart Card kit55 to each
enrolled user, who is authorized by the Participant to send payment messages
to the RTGS system on its behalf. The Participant shall be accountable for the use
of the Smart Card.

The Participant can deactivate or lock the access of any of its registered RTGS
system users by electronically submitting to the PSD a User Account Form,
requesting deactivation or locking of the user’s profile in the RTGS system.

e. The Participant shall submit a duly accomplished Channel Registration Form if

it intends to use SWIFT or the VPN-STP payment messaging channel.

55
The Smart Card Kit contains the card with personal identification number (PIN) and personal
unblocking key (PUK), and the reader.

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 Appendix 1401-2

Cessation of Participation in the RTGS PS through Voluntary Withdrawal

a. The Chief Executive Officer, or its equivalent, of the Participant shall formally notify
the Bangko Sentral of its voluntary withdrawal of participation from the RTGS PS.
This letter shall disclose the reason for voluntary withdrawal and the effectivity
date, which should not be earlier than seven (7) working days from the Bangko
Sentral's receipt of such notification.

b. The letter shall be addressed to:

The Director
Payments and Settlements Department (PSD)
Room 101, 5-Storey Building
Bangko Sentral ng Pilipinas
A. Mabini Street, Malate, 1004 Manila

c. If the notification is electronically sent, the copies of the letter and Summary
Statement Form (SSF), each page of which must bear the stamp “Certified True
Copy” and the signature of the Participant’s authorized officer, shall be emailed by
a registered email sender to the Director, PSD, at RTGS@bsp.gov.ph.

d. The Participant may be required to submit other documentary requirements, as

deemed necessary.

e. The Bangko Sentral shall acknowledge receipt of the Participant’s letter of

voluntary withdrawal and advise the Participant of the date of closure of its SA, as
determined by the Bangko Sentral.

f. The Bangko Sentral shall issue an Advisory on said termination of participation.

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 Appendix 1401-3

Procedure for Manual Settlements

a. The Participant shall accomplish the Manual Settlement Form (MSF),56 signed
by two (2) authorized signatories as indicated in its Secretary’s Certificate.

b. If the MSF and Summary Statement Form (SSF) are electronically submitted,
each page of such forms shall be stamped with “Certified True Copy” and
signed by the Participant’s authorized officer(s).

c. Using the email that is registered with the Bangko Sentral Payments and
Settlements Department (PSD), the Participant shall send the duly
accomplished forms to RTGS@bsp.gov.ph on or before 5:30 p.m. on the value
date of the settlement. Any request received after this cut-off time shall not be
accommodated.

d. The PSD shall evaluate the request. Upon approval, the PSD shall encode the
corresponding entry.

e. The PSD shall confirm the execution of the manual settlement by returning a
copy of the Bangko Sentral-approved MSF to the Participant via email.

f. The sending and receiving Participants may view the amounts posted under
their SAs, through the RTGS system.

56
Template posted on the Bangko Sentral website (www.bsp.gov.ph)
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 Appendix 1401-4

INTRADAY SETTLEMENT FACILITY

Appendix to Section 1401.14

The Intraday Settlement Facility (ISF) shall operate as follows:

a. Nature of the Facility. The ISF allows eligible participants of the Peso Real-Time Gross
Settlement (RTGS) Payment System (PS) to obtain funds from the Bangko Sentral
through a sale and repurchase mechanism in order to prevent gridlock in the RTGS
system due to timing mismatch in the settlement of large-value payments.

b. Eligibility. An RTGS PS participant that meets the following criteria may register with
the Bangko Sentral as an ISF participant:

(1) The RTGS PS participant falls under the category Participants with Settlement
Accounts (SAs);
(2) This participant owns eligible securities registered in its name in the Bureau of the
Treasury’s (BTr) Enhanced National Registry of Scripless Securities (NRoSS); and
(3) This participant is in good standing in the RTGS PS and is not otherwise disqualified
to avail itself of the ISF.

Participation in the ISF shall commence on the date of approval by the Bangko Sentral
of the application for ISF registration.

c. Access. Access to the ISF requires the transfer of eligible securities to a specified sub-
account under the BSP-ISF direct account in the NRoSS. Upon transfer, this sub-
account will be automatically designated by NRoSS to record the transferred securities
under the same name as that of the originating account.57 This transfer may be done
through any of the following modes:

(1) Direct ISF Participation

An ISF participant, such as a broker/dealer, that has a direct account with the NRoSS
shall transfer its own securities from this account to the BSP-ISF direct account in
the NRoSS.

A direct participant may transfer securities on behalf of a sponsored participant as

stated below.

(2) Sponsored ISF Participation

Sponsorship is limited to the act of transferring securities in the NRoSS to enable an

ISF participant without an NRoSS direct account to obtain funding through the ISF.

An ISF participant without a direct account with the NRoSS may be sponsored by
its broker/dealer with a direct NRoSS account. The sponsored ISF participant must
transfer its securities through its sponsor.

57
This refers to a source account from where the securities of the account holder is debited.

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 The ISF transactions of a sponsored participant shall be for all intents and purposes
considered as its own transactions.

d. Eligible Securities. Peso-denominated scripless National Government securities that

are free and unencumbered and with remaining maturity of eleven (11) days to ten (10)
years may be eligible for ISF transactions. The securities must be registered in the
NRoSS in the name of the ISF participant.

e. Valuation of Securities. Eligible securities shall be valued using the appropriate

previous day market/benchmark rates, as prescribed by the Securities and Exchange
Commission (SEC)-licensed benchmark administrator, subject to a haircut.

f. Haircut. This shall be determined and applied based on prevailing policies of the
Bangko Sentral.

g. Limit. The total amount of ISF that a participant may avail itself of is limited to the value
of transferred securities subject to prescribed haircut and other applicable deductions,
if any. Said value shall be reflected in the participant’s ISF account in the RTGS system.

h. Availment of the Facility. A participant may avail itself of the ISF by transferring funds
from its ISF account to its SA through the RTGS system in order to fund its queued
payments or expected outgoing payment instructions in the RTGS system.

The facility may be availed more than once during the same business day the subject
securities were transferred and valued.

i. Nature of ISF Availment. Each ISF availment is considered as a sale of eligible securities
to the Bangko Sentral, corresponding to the amount of the ISF availed. The sale shall be
coupled with a commitment to repurchase the subject securities from the Bangko
Sentral within the prescribed repurchase period. The repurchase price shall be the
same as the original purchase price.

j. Repurchase. Any security sold to the Bangko Sentral on a given business day pursuant
to the ISF shall be repurchased within the period prescribed by the Bangko Sentral on
the same business day.

When the SA balance of a participant is not sufficient to cover its ISF availment, the
participant shall not be allowed to partially repurchase the underlying securities to the
extent of its SA balance.

The failure of the participant to repurchase the underlying securities within the period
prescribed by the Bangko Sentral on the same business day that the ISF was availed
shall cause the automatic conversion of the ISF availment to Extended ISF.

In the case of Extended ISF, the participant shall repurchase the security within the
Bangko Sentral-prescribed period on the succeeding business day.

k. Fee. In order to encourage availment and prompt repurchase of securities by the ISF
participants, the Bangko Sentral shall impose no fee if the repurchase is done within
the period prescribed by the Bangko Sentral on the same business day the ISF is
availed. Extended ISF shall be subject to a fee at a penal rate equivalent to the
Overnight Lending Facility (OLF) rate plus 600 basis points.

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l. Finality of Transactions. All ISF transactions that go through the RTGS system in
accordance with the RTGS Rules are deemed final and irrevocable.

m. Statements of Account/Transaction Details. ISF transactions and accounts may be

monitored in the RTGS system. Security balances, which are updated in real time upon
each sale and repurchase, may also be viewed in NRoSS. Such information and those
found in related statements of accounts are available to direct NRoSS and RTGS PS
participants.

n. Operating Hours. The ISF is available on demand to eligible participants following the
Bangko Sentral-prescribed schedule within the RTGS PS operating hours.

o. Applicable Rules. Participation in the ISF shall be governed by these rules, the ISF
Registration Terms and Conditions, Participation Agreement in the RTGS PS,
as well as other relevant rules, regulations, and guidelines issued by the Bangko Sentral.

p. Penalty Clause. Violations of the applicable rules, including repeated failure to

repurchase securities sold to the Bangko Sentral under an Extended ISF availment, are
governed by penalties and sanctions provided under Section 1401.20 of the MORPS,
including but not limited to cancellation of ISF eligibility and pre-termination of any
outstanding ISF availment availed. Extended ISF shall be subject to a fee at a penal rate
equivalent to the Overnight Lending Facility (OLF) rate plus 600 basis points.

q. Finality of Transactions. All ISF transactions that go through the RTGS system in
accordance with the RTGS Rules are deemed final and irrevocable.

r. Statements of Account/Transaction Details. ISF transactions and accounts may be

monitored in the RTGS system. Security balances, which are updated in real time upon
each sale and repurchase, may also be viewed in NRoSS. Such information and those
found in related statements of accounts are available to direct NRoSS and RTGS PS
participants.

s. Operating Hours. The ISF is available on demand to eligible participants following the
Bangko Sentral-prescribed schedule within the RTGS PS operating hours.

t. Applicable Rules. Participation in the ISF shall be governed by these rules, the ISF
Registration Terms and Conditions, Participation Agreement in the RTGS PS,
as well as other relevant rules, regulations, and guidelines issued by the Bangko Sentral.

u. Penalty Clause. Violations of the applicable rules, including repeated failure to

repurchase securities sold to the Bangko Sentral under an Extended ISF availment, are
governed by penalties and sanctions provided under Section 1401.20 of the MORPS,
including but not limited to cancellation of ISF eligibility and pre-termination of any
outstanding ISF availment.

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