FIMA 204: Monetary Policy and Central Banking

Efficient Payment and Settlement System

• Payment systems are essential to the effective functioning of financial systems worldwide, providing channels for funds transfer among banks and institutions to discharge payment obligations.
• An efficient, secure, and reliable payment system reduces the cost of exchanging goods and services and is an essential tool for implementing monetary policy and smooth functioning of money and capital markets.

Roles of Bangko Sentral ng Pilipinas (BSP)

• Operator of the real-time gross settlement system, PhilPaSS, ensuring its continuous, safe, and efficient operation.
• Provider of credit facilities to banks as a lender of last resort, offering liquidity tools such as Intraday Liquidity Facility (ILF) and Overdraft Credit Line (OCL).
• Overseer of the payments and settlements system, ensuring safeguards are in place to mitigate systemic risks.
• User of its own RTGS system for settling transactions with stakeholders.
• Initiator of changes and reforms to the payments system, conducting studies and research to ensure it grows and matures according to global standards.

National Payment Systems Act (NPSA)

• Republic Act No. 11127 provides a comprehensive legal and regulatory framework to support the twin objectives of maintaining a payment system that controls systemic risk and provides an environment conducive to sustainable economic growth.
• The NPSA mandates the BSP to oversee 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.

BSP Digital Payment Transformation Roadmap 2020-2023

• Vision: To promote financial inclusion and digitalization of payments, which are mutually reinforcing.
• Strategic Outcomes (Targets by 2023):
  • Foster the growth and development of digital payment innovations through enabling policies and regulations.
  • Promote financial inclusion, reducing transaction costs and eliminating barriers to owning a transaction account.
  • Shift towards a cash-lite economy, making digital payments ubiquitous, accessible, and affordable.

Challenges and Opportunities

• Lack of awareness, trust, and infrastructure are major barriers to adopting digital payments.
• The COVID-19 pandemic has accelerated the shift towards digital payments, reducing the need for mobility and preventing health risks from face-to-face and over-the-counter financial transactions.
• The growth of digital payments will facilitate the growth of Fintech businesses engaged in e-commerce.

A learning material for FIMA 204 course, covering topics on monetary policy and central banking. This course is offered by the Polytechnic University of the Philippines, College of Accountancy and Finance.