New BSP rules seek to ensure undisrupted settlement of transactions

FINANCIAL INSTITUTIONS and other participants in the Peso Real-Time Gross Settlement (RTGS) system must report operational issues immediately and adopt alternative measures to ensure that transactions can go through despite disruptions, the Bangko Sentral ng Pilipinas (BSP) said in a new memorandum.

The issuance dated April 1 amends the Peso RTGS rules on incident management for participants in the Manual of Regulations for Payment Systems and is effective immediately.

Participants in the Peso RTGS payment system are banks, nonbanks with quasi-banking function, nonbank electronic money issuers, government agencies, financial market infrastructures (FMIs), clearing switch operators (CSOs), and BSP units, regional offices, and branches.

“In the event of connectivity or system availability issues affecting operational processes done through the Peso RTGS system, including report generation, transaction monitoring, and receipt of settlement notifications, the participant, once aware of the said issues, shall coordinate with the Bangko Sentral through official communication channels, in determining whether the issue originates from its end or from the Peso RTGS system,” the central bank said.

If the incident is on the side of the Peso RTGS system, participants can apply alternative settlement mechanisms if the issue remains unresolved two hours from incident confirmation. They must also monitor BSP advisories about the status of the incident.

Meanwhile, if the issue is due to a participant’s own system or connection to the Peso RTGS system, they must inform the BSP under an hour upon discovery and then adopt their preferred alternative solutions if the incident is still unresolved after two hours.

Participants must conduct an immediate incident investigation, implement their internal incident management framework, and coordinate with the BSP on the status of the incident. They should also extend all the necessary assistance for the timely and effective resolution of the issue.

They can also activate their business continuity plan (BCP) if necessary.

One alternative option for banks and other financial institutions is to apply bilateral netting arrangements with counterparties. This refers to the offsetting of obligations between two parties to reduce the number and value of payments or deliveries needed to settle a set of transactions.

They may also designate a paying agent, or a direct participant that makes payments on behalf of another direct participant, to execute their transactions in PhilPaSS Plus.

Lastly, they may invoke the BCP prescribed by the BSP for participants with settlement accounts. This contains procedures for when PhilPaSS Plus is operational but a participant is unable to connect and/or send payment messages, and for when PhilPaSS Plus is not operational.

Meanwhile, the alternative settlement options for FMIs and CSOs are to apply multilateral netting arrangements with their participants — which is the offsetting of obligations between or among multiple participants to result in a single net position per participant — and to invoke their respective joint BCPs with the BSP under existing regulations, which include contingency measures on backup facilities, recovery sites, connectivity backups, and alternative operating procedures. — K.K. Chan