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BSP Includes Co-operatives in Electronic Money Rules

Posted February 26, 2023


THE Bangko Sentral ng Pilipinas (BSP) issued Circular No. 1166 dated Feb. 7 amending the Manual of Regulations for Banks and Manual of Regulations for Non-Bank Financial Institutions, specifically the rules governing the issuance of e-money and the operations of e-money issuers in the Philippines.

With the inclusion of ‘non-bank financial institutions’, this opens the door for co-operatives to participate in the e-money industry, and enable co-ops to provide better, faster, and secure services to their members.

BSP Circular 1166 includes rules on liquidity, capitalization, load limit, as well as guidelines on reporting and sanctions.  The requirements for e-money issuers (EMIs) are based on the scale of their operations to help ensure the industry’s resilience and protect customers amid increased technology risks.

EMIs will have a year to comply with the revised regulations, which will take effect 15 calendar days following their publication in the Official Gazette or any newspaper of general circulation.

“The amendments are geared towards equipping EMIs in attending to the evolving needs and behaviors of consumers and in responding to the existing and emerging risks in the financial sector, such as cybersecurity and money laundering,”BSP Governor Felipe M. Medalla Medalla said in a statement.

“The revised guidelines reaffirm the BSP’s commitment to uphold the welfare of Filipinos by promoting a safe, secure, and inclusive financial system,” he added.

The new regulations set new capital and liquidity requirements for e-money issuers with large operations that are higher compared to those for smaller firms to account for bigger entities’ higher risk exposure.

“The regulations governing e-money issuers and operations allow Bangko Sentral-Supervised Financial Institutions (BSFIs) to adopt risk management systems commensurate to their size, risk profile, complexity of operations, and systemic importance. This enables BSFIs to provide financial services attuned to the evolving needs and behavior of consumers and supported by safeguards and controls to ensure that risks remain within manageable levels,” the circular read.

Under the new rules, EMIs with monthly outstanding e-money balances of at least P100 million are required to maintain liquid assets in trust accounts equivalent to at least 50% of their outstanding balance and to cover the remaining balance with placements in bank deposits, government securities, or other liquid assets acceptable to the BSP.

“EMIs with outstanding e-money balance below P100 million may continue to comply with the liquidity requirements by holding eligible liquid assets,” the BSP said.

The central bank also defined large-scale EMIs as those with a 12-month average value of aggregated inflow and outflow transactions that are equal to or greater than P25 billion. These large-scale EMIs must maintain a minimum capital of P200 million, while small-scale EMIs need to have a minimum capitalization of P100 million.

The revised rules lifted the P100,000 monthly aggregate load limit for EMIs, allowing them to set a predefined limit and threshold per client category, based on the results of their institutional risk assessment and customer due diligence process.

EMIs are expected to keep these due diligence records for a period of at least five years.

The guidelines expanded the definition of e-money to include those that may be transferred to other accounts. Previously, it was limited to those withdrawable in cash or cash equivalent.

The rules also set e-money apart from a deposit that earns interest, with e-money only credited to customers at face value and not higher than the amount used to purchase it.

“In addition, the new rules broadened the acceptability of e-money to include merchants and issuers using the same mobile application,” the central bank added.

The circular likewise simplified the classification of EMIs into two categories: EMI-Banks and EMI Non-Bank Financial Institutions (EMI-NBFI). EMIs previously classified as EMI-Others will now be grouped under EMI-NBFI, which will also include cooperatives.

The NATCCO Network is currently applying for an EMI-NBFI license, and is coordinating with BSP officials on the submission of documentary requirements.

The BSP said EMIs should provide clear terms and conditions to merchants and users, adding that they must be informed of any change in their system 30 days prior to implementation.

Latest BSP data showed there are 29 lenders that have an EMI bank license, while 41 are regulated as nonbank EMIs. — 

K.B. Ta-asan



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