Law Summary
Policy Declaration
- Recognizes payment systems as critical infrastructure.
- Emphasizes safe, efficient operation for monetary and financial stability.
Objectives
- Promote safe, secure, efficient, reliable payment systems.
- Control systemic risk.
- Support sustainable economic growth.
Definitions
- "Bangko Sentral" - Central monetary authority.
- "Clearing" - Process before settlement of payment orders.
- "Designated payment system" - Payment system officially designated for supervision.
- "Director" - Board member or person considered such by regulations.
- "End-user" - Originator or ultimate receiver of payment instruction.
- "Fund" - Unit of value in transactions.
- "Issuer" - Provides instruments or means to hold/transfer funds.
- "Manager" - Competent person appointed to manage designated system operations.
- "Monetary Board" - Governing body of Bangko Sentral.
- "Netting" - Offsetting payment obligations among participants.
- "Officer" - Management employee or equivalent person.
- "Operator" - Provides clearing/settlement, or controls payment system operations.
- "Participant" - Operator, issuer, service provider excluding end-users.
- "Payment instrument" - Tangible/intangible means to transfer funds.
- "Payment order" - Request for fund transfer.
- "Payment system" - Set of instruments, procedures, participants enabling fund movement.
- "Payment System Management Body" - Entity for self-regulation organized by participants.
- "Service provider" - Technology/infrastructure provider.
- "Settlement" - Final discharge of fund transfer obligations.
- "Systemic risk" - Failure of participant threatening system stability.
Authority of Bangko Sentral
- Oversees and regulates payment systems to ensure stability and effectiveness.
Powers of Bangko Sentral
- Designate payment systems posing systemic risk or for public interest.
- Require prior authority for system operators based on capability assessment.
- Accredit and regulate self-regulatory management bodies.
- Issue rules on operation standards, resource adequacy, qualifications of directors/officers, confidentiality, AML compliance, pricing, accreditation, and other matters.
- Issue directives/orders to participants for system safety and reliability.
- Require operational reports and statistical information.
- Collect fees to cover supervisory expenses.
- Exercise other necessary powers for objectives.
Adoption of International Standards
- Guided by internationally accepted standards and practices in regulation.
Bangko Sentral Ownership of Payment Systems
- Authority to own and operate payment systems.
- Determine participation and account opening for settlement.
- Internal safeguards for independent oversight.
Coordination with Other Agencies and Regulators
- Coordinate to avoid regulatory gaps or duplications.
- Ensure licenses are granted, suspended or revoked in consultation.
- Coordinate with Securities and Exchange Commission on securities transactions.
- Cooperate with foreign regulators for cross-border transactions.
Registration of Payment System Operators
- Existing operators to register within six months of the Act.
- New operators to register within prescribed periods.
Organization of Operators
- Designated system operators, except Bangko Sentral, must incorporate as stock corporations.
- Excluded from definition of debtor under the Financial Rehabilitation and Insolvency Act while authorized.
Certificate of Authority for Registration
- SEC shall not register articles/incorporation or by-laws without certificate of authority from Monetary Board.
Acquisition of Substantial Shareholdings
- Ownership exceeding 10% requires prior approval of Monetary Board.
- Transfers without approval are void and not recognized.
Responsibilities of Operators
- Responsible for safe, efficient, and reliable operations.
- Develop selection, monitoring, and self-regulation processes subject to review.
Finality of Settlement
- Payments settled per system procedures are final and irrevocable.
- If funds paid were not legally due, obligation shifts to payee.
Insolvency Notification
- Participants must notify operator upon insolvency or related proceedings.
- Operators must notify participants and Bangko Sentral immediately.
- Operators must stop processing pending orders involving insolvent participant.
Designation of Manager for Operators
- Bangko Sentral may appoint a competent manager without prior hearing when system safety threatened.
- Grounds include violations, failure to comply with orders, insufficient assets, capital erosion, or detrimental financial conditions.
- Manager assumes control; directors/officers’ powers suspended unless approved otherwise.
- Actions of Monetary Board are final; affected parties may file certiorari within 10 days.
- Manager to determine within one year if management may resume or recommend authority revocation.
- Costs of management prioritized for payment.
Netting
- Operators may net payment orders upon insolvency notification as per system rules.
- Netting recognized in insolvency proceedings.
Administrative Sanctions
- Monetary Board may impose fines up to P1,000,000 per violation or P100,000/day for continuing violations.
- Additional fines based on profit gained or loss avoided.
- Directors/officers may be suspended, disqualified, or removed for willful violations.
- Cease and desist orders can be issued.
- Certificate of authority may be revoked for fraud, threats to system safety or failure to comply with rules.
- Registration may be canceled if system facilitates fraud or illegal transactions.
Criminal Penalties
- Willful violation punishable by fine (P200,000 to P2,000,000), imprisonment (2 to 10 years), or both.
Implementing Rules and Regulations
- BSP to promulgate necessary rules within 60 days from effectivity for enforcement.
Separability Clause
- Unconstitutional provisions do not affect validity of remaining provisions.
Repealing Clause
- Inconsistent laws, rules, and regulations are repealed or modified accordingly.
Transitory Provision
- Existing payment systems given sufficient time to comply with requirements as determined by Bangko Sentral.
Effectivity
- The Act takes effect 15 days after publication in official gazette or newspapers of general circulation.