AN ACT PROVIDING FOR THE REGULATION AND SUPERVISION OF PAYMENT SYSTEMS

Seventeenth Congress
Third Regular Session

Begun and held in Metro Manila, on Monday, the twenty-third day of July, two thousand eighteen.

REPUBLIC ACT No. 11127

AN ACT PROVIDING FOR THE REGULATION AND SUPERVISION OF PAYMENT SYSTEMS

Be it enacted by the Senate and House of Representatives of the Philippine Congress assembled:

Section 1. - Title. - The short title of this Act shall be "The National Payment Systems Act".

Section 2. Declaration of Policy. - The State recognizes that payment systems are crucial parts of the financial infrastructure of the country and it is essential that they function safely and efficiently for the stability and effectiveness of the monetary and financial system.

Section 3. Objectives. - The State shall promote, through the Bangko Sentral, the safe, secured, efficient and reliable operation of payment systems in order to control systemic risk and provide an environment conducive to the sustainable growth of the economy.

Section 4. Definition of Terms. - For the purpose of this Act, the following terms shall refer to:

Section 5. Authority of the Bangko Sentral. – The Bangko Sentral shall oversee the payment systems in the Philippines and exercise supervisory and regulatory powers for the purpose of ensuring the stability and effectiveness of the monetary and financial system.

Section 6. Powers of the Bangko Sentral. - In the performance of its mandate under this Act, the Bangko Sentral shall have, in addition to its powers under existing laws, the following powers:

Section 7. Adoption of International Standards and Practices. - In the exercise of its authority under this Act, the Bangko Sentral shall be guided by internationally accepted standards and practices.

Section 8. Bangko Sentral Authority to Own and Operate a Payment System. - The Bangko Sentral shall have the authority to own and operate payment systems as may be deemed necessary by the Monetary Board. The Bangko Sentral shall have the authority to determine who shall be allowed to participate in payment systems owned and operated by it and who shall be allowed to open an account with the Bangko Sentral for settlement purposes. The Bangko Sentral shall adopt internal safeguards to ensure appropriate independent oversight of its operator functions.

Section 9. Coordination with Other Government Agencies and Foreign Regulators. – The Bangko Sentral shall coordinate with other regulators and other concerned government agencies to avoid gaps, inefficiencies, duplications and inconsistencies in their respective regulation of other systems which are related to or interconnected with payment systems. The grant, suspension or revocation of any government license necessary for the conduct of business of a payment system operator must be done only with prior consultation with the Bangko Sentral.

The Bangko Sentral shall coordinate with the Securities and Exchange Commission (SEC) to facilitate the orderly discharge of payment obligations arising from security transactions in securities trading, clearing and settlement systems under Republic Act No. 8799 or "The Securities Regulation Code".

The Bangko Sentral shall likewise coordinate with the overseers of payment systems of other countries to facilitate safe, efficient and reliable cross-border payment transactions.

Section 10. Registration of Payment System Operators. - Within six (6) months from the effectivity of this Act, all operators of payment systems as defined under Section 4 of this Act shall register with the Bangko Sentral. Operators of payment systems, which shall commence business or operations subsequent to the effectivity of this Act, shall register with the Bangko Sentral in such manner and within such reasonable period as may be prescribed by the Monetary Board.

Section 11. Organization of Operators of Designated Payment Systems. - Operators of the designated payment system, except payment systems operated by the Bangko Sentral, shall be required to incorporate as stock corporations for the purpose of operating a payment system, and shall meet the minimum requirements as may be prescribed by the Monetary Board. Operators of designated payment systems, so long as they continue to be authorized by the Bangko Sentral to operate as such, shall not be included in the definition of a debtor under Republic Act No. 10142, otherwise known as the "Financial Rehabilitation and Insolvency Act (FRIA) of 2010".

Section 12. Certificate of Authority to Register Operators of Designated Payment System. – The SEC shall not register the articles of incorporation of any operator of a designated payment system, or any amendment thereto, or otherwise issue a license to do business in the Philippines, unless accompanied by a certificate of authority to register issued by the Monetary Board, under its seal. The SEC shall also not register the by-laws of any operator of a designated payment system, or any amendment thereto, unless accompanied by a certificate of authority from the Bangko Sentral.

Section 13. Transfer and Acquisition of Substantial Shareholdings. – No person shall acquire shares in an operator of a designated payment system that will result in ownership or control, directly or indirectly, of more than ten percent (10%) of the voting stock of such operator, without obtaining the prior approval of the Monetary Board. Prior to Monetary Board approval, no such transfer or acquisition of shares shall have legal effect nor shall the same be recognized in the stock and transfer books of the operator or in the records of any government agency.

Section 14. Responsibilities of the Operator of the Designated Payment System. – The operator of the designated payment system shall be primarily responsible for the maintenance and operation of a safe, efficient and reliable payment system in accordance with rules and regulations. This includes the development of a process, which shall be subject to Bangko Sentral review, for the selection, monitoring and self-regulation.

Section 15. Finality of Settlement. - Notwithstanding the provisions of existing laws to the contrary, settlement effected in accordance with the agreed procedures of a payment system shall be final and irrevocable and shall not be subject to reversal for any reason whatsoever: Provided, That, if it is shown and established that any such fund so paid and transferred was not legally due, the settlement shall remain and such amount shall constitute a new monetary obligation owed by the payee to the person who caused the payment.

Section 16. Notification in Case of Insolvency of Participant in a Payment System. - The participant of a payment system shall notify in writing the operator of such payment system upon the issuance of a stay order or the declaration of insolvency, bankruptcy, rehabilitation or placement under receivership or liquidation of the participant on the day of the receipt of the order or resolution issued by the court or quasi-judicial agency. Upon receipt by the operator of such notice, the operator shall immediately stop the processing of any pending payment order involving said participant.

The operator of a payment system shall notify in writing its participants and the Bangko Sentral upon the issuance of a stay order or the declaration of its insolvency, bankruptcy, rehabilitation or placement under liquidation on the day of the receipt of the order or resolution issued by the court or quasi-judicial agency. Section 17. Designation of a Manager to Manage the Operations of the Operator of a Designated Payment System. - In order to avert disruptions in payment systems which may adversely affect the country's monetary and financial stability, the Bangko Sentral may, upon determination of the existence of any of the circumstances enumerated below, based on the report of the head of the supervising or examining department, and with prior approval of the Monetary Board, designate without need for prior hearing a manager of recognized competence in payment systems to manage the operations of the operator of a designated payment system, as may be necessary or expedient.

A threat to the safety, efficiency and reliability of the designated payment system exists as a result of any of the following:

The actions of the Monetary Board taken under this section shall be final and executory, and may not be restrained or set aside by the court except on petition for certiorari on the ground that the action taken was in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction. The petition for certiorari may only be filed by the stockholders of record representing the majority of the capital stock within ten (10) days from receipt by the board of directors of the operator of the designated payment system of the notice from the Bangko Sentral advising of the designation of a manager to manage the operations of such operator.

The designation of a manager who will manage the operations of the operator of a designated payment system shall only be for such period during which any of therefore mentioned circumstances exists. The Monetary Board, however, may replace the manager as it may deem necessary. The manager so designated shall immediately control, manage, and administer the operations of the operator of a designated payment system. Effective immediately upon designation, the powers, functions, and duties, as well as allowances, remunerations and perquisites of the incumbent directors shall be suspended. The suspension shall also apply to the officers of such operator of a designated payment system, unless the manager gives its approval in writing for any officer to continue acting as such under such terms and conditions as the manager may determine. The relevant provisions of the articles of incorporation and by-laws of such operator are likewise suspended.

The manager so designated shall determine within the period prescribed by the Monetary Board, but not to exceed one (1) year from the designation, whether any of the aforementioned circumstances still exists or whether the operator of a designated payment system may be permitted to resume management with safety to its payment system participants and end-users: Provided, That any determination for the resumption of management of the operator of a designated payment system shall be subject to prior approval of the Monetary Board.

If the manager so designated determines that the operator of a designated payment system cannot continue its operation without causing damage to its participants, end-users or the public in general, the manager so designated shall notify the Monetary Board in writing of its findings and recommend the revocation of the certificate of authority of an operator of a designated payment system. Once the certificate of authority is revoked by the Monetary Board, the provisions of Republic Act No. 10142 shall apply. For this purpose, the Bangko Sentral may initiate the appropriate action under the aforesaid law.

The costs and expenses in managing the operations of the operator of a designated payment system, including the remuneration of the designated manager, shall be paid first before other claims out of the funds and properties of the operator of a designated payment system.

The Monetary Board shall issue implementing guidelines to govern the management of the operations of the operator of a designated payment system by the designated manager, including but not limited to:

Section 18. Netting. - Notwithstanding the provisions of existing laws to the contrary, when an operator receives from the participant a notice pursuant to Section 16, the operator may effect the netting of all payment orders received before such notice in accordance with the (agreed procedures of the payment system. The insolvency, bankruptcy, rehabilitation, receivership or liquidation proceedings shall recognize any such netting as valid.

Section 19. Administrative Sanctions. -

Section 20. Other Penalties and Sanctions. - Whenever any person or entity willfully violates this Act, rule or regulation, directives or orders duly promulgated by the Monetary Board pursuant hereto, the person or persons responsible for such violation shall be punished by a fine of not less than Two hundred thousand pesos (P200,000.00) or more than Two million pesos (P2,000,000.00) or by imprisonment of not less than two (2) years nor more than ten (10) years, or both, at the discretion of the court.

Section 21. Implementing Rules and Regulations. - Within sixty (60) days from the effectivity of this Act, the Bangko Sentral ng Pilipinas (BSP) shall promulgate the necessary rules and regulations for the effective implementation of this Act.

Section 22. Separability Clause. - Should any provision herein be declared unconstitutional, the same shall not affect the validity of the other provisions of this Act.

Section 23. Repealing Clause. – All laws, decrees, orders, rules, and regulations or other issuances or parts inconsistent with the provisions of this Act are hereby repealed or modified accordingly.

Section 24. Transitory Provision. - Payment systems existing on the day of the effectivity of this Act shall be given sufficient time, as may be determined by the Bangko Sentral, to comply with the requirements of this Act.

Section 25. Effectivity. - This Act shall take effect fifteen (15) days following its publication in the Official Gazette or in two (2) newspapers of general circulation in the Philippines.

Approved,

GLORIA MACAPAGAL-ARROYO
Speaker of the House of Representatives

VICENTE C. SOTTO III

President of the Senate

This Act was passed by the Senate of the Philippines as Senate Bill No. 178 on August 28, 2018 and adopted by the House of Representatives as an amendment to House Bill No. 5000 on September 5, 2018.

DANTE ROBERTO P. MALING
Acting Secretary General
House of Representatives

MYRA MARIE D. VILLARICA
Secretary of the Senate

Approved: October 30, 2018

(Sgd.) RODRIGO ROA DUTERTE
President of the Philippines