The Bangko Sentral ng Pilipinas (BSP) said Friday it revamped the rules on banks’ bounced checks and introduced a new liquidity facility to make the payment system smoother, safer and more efficient.
Banks under the present rules 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. The 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.
It said 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 they 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,” the BSP said.
“Hence, aside from improving confidence in the check clearing and settlement system, the enhanced policy enables better fund management among check users,” it said
The BSP also said that in check clearing, banks should 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 withdrawability of check deposits on the next banking day at the latest, it said.
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 BSP said the facility allows banks to obtain funds from the central bank to prevent gridlocks due to timing mismatch in the settlement of payments at PhilPaSSplus.
