The Bangko Sentral ng Pilipinas (BSP) has issued amendments to the regulations on the return of banks’ bounced checks and on the rollout of the “Intraday Settlement Facility” (ISF).
These are part of BSP’s broader policy reforms aimed at further enhancing the efficiency and safety of the country’s payment system.
Currently, banks have until the next banking day to return bounced and defective checks to the presenting bank, with the transfer of funds to the drawee bank dated on the day of the check’s deposit. This practice of retroactive dating, however, causes changes in the balances of banks’ settlement accounts with the Philippine Payments and Settlements System-Plus (PhilPaSSplus), the BSP-operated facility that enables check settlement.
To mitigate settlement and liquidity risks that may arise from the mismatch, the revised rules provide that banks may return high-value, “not sufficiently funded” (NSF) and defective checks as early as the day these are deposited. Banks will still be allowed to return NSF and questionable checks the next banking day, but settlement will no longer be backdated. As a result, the amended check policy ensures certainty of funds transfer from the check issuer to the payee. Hence, aside from improving confidence in the check clearing and settlement system, the enhanced policy enables better fund management among check users.
Moreover, in check clearing, banks shall no longer be allowed to incur overdrafts or to draw funds exceeding what a bank’s demand deposit account (DDA) holds. With this, banks no longer need to tap the BSP’s Overdraft Credit Line (OCL). The experience of financial consumers, however, will not be affected by the amended policy in terms of the withdrawability of check deposits on the next banking day at the latest.
The central bank also reintroduced the PhilPaSSplus Intraday Liquidity Facility, which is now known as the ISF, to reflect operational changes arising from BSP’s adoption of global payment standards and the full automation of this system. The facility allows banks to obtain funds from the central bank to prevent gridlocks due to timing mismatches in the settlement of payments at PhilPaSSplus.
The amended check policy shall be implemented three (3) months from its effectivity date, which is 15 days after its publication. The ISF regulation, meanwhile, shall be enforced three (3) months from the date of publication.
The transitory period for the latter will allow banks to make appropriate internal changes in compliance with revised regulations. Upon the lapse of said period, BSP shall close the OCL and the ISF shall become the sole central bank-operated funding facility.
The PhilPaSSplus enables the efficient and low-risk settlement of large-value fund transfers between financial institutions. It also settles retail payment clearing transactions, ensuring that individuals, businesses, and the government can securely send and receive money through several channels, such as checks, automated teller machines, InstaPay, and PESONet.