BSP tweaks settlement facility for banks

The Bangko Sentral ng Pilipinas (BSP) has formalized changes to its intraday settlement facility that allow banks to automatically tap central bank funds to cover queued or expected outgoing payments.

This is a move aimed at keeping money flowing smoothly through the domestic payment system.

The changes, set out in Memorandum M-2025-039, amended the manual of regulations for payment systems and give regulatory force to the automation of the Intraday Settlement Facility (ISF) that the central bank announced in late June.

The ISF is an automated liquidity facility that allows eligible participants in the payment system to obtain funds from the BSP through a sale and repurchase mechanism. This is to prevent system gridlocks caused by timing mismatch in the settlement of large-value payments.

Under the automated setup, participating banks can obtain funds within minutes of initiating a repurchase agreement, or repo, with the central bank. The liquidity can be used to cover queued or anticipated outgoing payment instructions in the system.

Previously, proceeds from repo transactions had to be credited manually, a process that also required manual acceptance and approval by the banks, adding delays.

With the changes, funds are credited automatically at the start of the day, typically within seconds, reducing the risk that payments remain in the queue beyond 15 minutes.

The automation also helps banks avoid penalties triggered when payment instructions exceed the 15-minute threshold.

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In the case of extended ISF, the participant must repurchase the securities within the period prescribed by the BSP on the succeeding business day. Failure to do so would bar a participant from repurchasing the central bank securities at a later time and date.

This enhancement was made possible by linking BSP’s payment system called “PhilPaSSplus” with the Bureau the Treasury’s Enhanced National Registry of Scripless Securities.

PhilPaSSplus has been designated as a systemically important payment system (SIPS). Under the BSP’s Payment System Oversight Framework, SIPS refers to a payment system that poses or has potential to pose systemic risk. This means it could threaten the stability of the national payment system.

For that reason, participants are required to comply with the rules, standards and requirements promulgated by the BSP, and contribute toward ensuring the safety, efficiency and reliability of the payment system.