Amendments to the Regulations on Intraday Liquidity Facility

BANGKO SENTRAL NG PILIPINAS

OFFICE OF THE GOVERNOR

CIRCULAR NO. 1181

Series of 2023

Subject: Amendments to the Regulations on Intraday Liquidity Facility

the following amendments to the Manual of Regulations for Payment Systems (MORPS). Sentral, for the following purposes: Manual of Regulations for Banks (MORB), and Manual of Regulations for Non-Bank Financial Institutions (MORNBFI) on the Intraday Liquidity Facility (ILF) of the Bangko The Monetary Board, in its Resolution No. 1472 dated 9 November 2023, approved

2 Reflect in the regulations the amendment of the name of the facility from ILF Align the regulations with legal and statutory requirements; and to "Intraday Settlement Facility (ISF)" and changes to the operation of this facility due to its automation;

3 Comply with the Principles for Financial Market Infrastructures (PFMI),

particularly on credit risk, collateral, liquidity risk, and related principles.

Section 1. Section 615 of the MORPS shall be amended to read as follows:

Part 6. The Peso RTGS Payment System (PS)

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execution of interdependent settlements to manage systemic risk. 615 Intraday Settlement Facility (ISF). The Bangko Sentral provides an ISF to eligible participants to ensure smooth flow of payments through the RTGs PS and timely

The operation of the ISF shall be in accordance with Appendix 1 of the MORPS

Appendix Q-17 of the MORNBFI on the Enhanced Intraday Liquidity Facility as well as the Section/Appendices Title provided under its respective Table of Contents and List of Appendices are hereby deleted. Section 2. Section 290 and Appendix 18 of the MORB and Section 232-Q and

publication either in the Official Gazette or in a newspaper of general circulation. Section 3. This Circular shall take effect ninety (90) calendar days following its

FOR THE MONETARY BOARD:

MAMERT ANGONAN

Officer Charge

10 November 2023

1 Principle 3 (Framework for the Comprehensive Management of Risks), Principle 4 (Credit Risk), Principle 5 {Collateral), and Principle 7 (Liquidity Risk}

Appendix 1

INTRADAY SETTLEMENT FACILITY

Appendix to Section 615

The Intraday Settlement Facility (ISF) shall operate as follows:

A. Nature of the Facility. The ISF allows eligible participants of the Peso Real-Time the RTGS system due to timing mismatch in the settlement of large-value Sentral through a sale and repurchase mechanism in order to prevent gridlock in Gross Settlement (RTGS) Payment System (PS) to obtain funds from the Bangkc payments.

B. Eligibility. An RTGS PS participant that meets the following criteria may register with the Bangko Sentral as an ISF participant:

1 2 3. This participant owns eligible securities registered in its name in the Bureau of This participant is in good standing in the RTGS PS and is not otherwise The RTGS PS participant falls under the category Participants with Settlement Accounts (SAs): the Treasury's (BTr) Enhanced National Registry of Scripless Securities (NRoSS); and

disqualified to avail itself of the iSF.

Participation in the ISF shall commence on the date of approval by the Bangko Sentral of the application for ISF registration

C Access. Access to the ISF requires the transfer of eligible securities to a specified

sub-account under the BSP-ISF direct account in the NRoSs. Upon transfer, this securities under the same name as that of the originating account.2 This transfer may be done through any of the following modes: sub-account will be automatically designated by NRoss to record the transferred

1. Direct ISF Participation

NRoSS shall transfer its own securities from this account to the BSP-ISF direct account in the NRoSs. An ISF participant, such as a broker/dealer, that has a direct account with the

A direct participant may transfer securities on behalf of a sponsored participant as stated below.

2. Sponsored ISF Participation

through the ISF. Sponsorship is limited to the act of transferring securities in the NRoSS to enable an ISF participant without an NRoSs direct account to obtain funding

participant must transfer its securities through its sponsor by its broker/dealer with a direct NRoSs account. The sponsored ISF An ISF participant without a direct account with the NRoss may be sponsored

2 This refers to a source account from where the securities of the account holder is debited.

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The ISF transactions of a sponsored participant shall be for all intents and purposes considered as its own transactions.

D. Eligibie Securities. Peso-denominated scripless National Government securities to ten (lo) years may be eligible for ISF transactions. The securities must be that are free and unencumbered and with remaining maturity of eleven (l) days registered in the NRoSS in the name of the ISF participant.

E. Valuation of Securities. Eligible securities shall be valued using the appropriate

haircut. previous day market/benchmark rates, as prescribed by the Securities and Exchange Commission (sEC)-licensed benchmark administrator, subject to a

F Haircut. This shall be determined and applied based on prevailing policies of the

Bangko Sentral.

G. Limit. The total amount of ISF that a participant may avail itself of is limited to the the RTGS system. value of transferred securities subject to prescribed haircut and other applicable deductions, if any. Said value shall be reflected in the participant's ISF account in

H. Availment of the Facility. A participant may avail itself of the ISF by transferring funds from its ISF account to its SA through the RTGS system in order to fund its queued payments or expected outgoing payment instructions in the RTGs System.

The facility may be availed more than once during the same business day the subject securities were transferred and valued.

Nature of ISF Availment. Each ISF availment is considered as a sale of eligible securities to the Bangko Sentral, corresponding to the amount of the isF availed. price shall be the same as the original purchase price. The sale shall be coupled with a commitment to repurchase the subject securities from the Bangko Sentrai within the prescribed repurchase period. The repurchase

J Repurchase. Any security sold to the Bangko Sentral on a given business day

pursuant to the ISF shall be repurchased within the period prescribed by the Bangko Sentral on the same business day.

securities to the extent of its SA balance. the participant shall not be allowed to partially repurchase the underlying When the SA balance of a participant is not sufficient to cover its ISF availment.

The failure of the participant to repurchase the underlying securities within the period prescribed by the Bangko Sentral on the same business day that the ISF was availed shall cause the automatic conversion of the ISF availment to Extended ISF.

the Bangko Sentral-prescribed period on the succeeding business day. In the case of Extended ISF, the participant shail repurchase the security within

K. Fee. In order to encourage availment and prompt repurchase of securities by the

the Overnight Lending Facility (OLF) rate plus 600 basis points. within the period prescribed by the Bangko Sentral on the same business day the ISF participants, the Bangko Sentral shall impose no fee if the repurchase is done IsF is availed. Extended ISF shall be subiect to a fee at a penal rate eguivalent to

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L Finality of Transactions. All ISF transactions that go through the RTGS system in

accordance with the RTGs Rules are deemed final and irrevocable.

M. Statements of Account/Transaction Details. ISF transactions and accounts may

be monitored in the RTGS system. Security balances, which are updated in real time upon each sale and repurchase, may also be viewed in NRoSs. Such information and those found in related statements of accounts are available to direct NRoSs and RTGs PS participants.

N Operating Hours. The ISF is available on demand to eligible participants following

the Bangko Sentral-prescribed schedule within the RTGS PS operating hours

O. Applicable Rules. Participation in the ISF shall be governed by these rules, the ISF Registration Terms and Conditions, Participation Agreement in the RTGS Ps Sentral. as well as other relevant rules, regulations, and guidelines issued by the Bangko

P Penalty Clause. Violations of the applicable rules, including repeated failure to

termination of any outstanding isF availment. the MORPS, including but not limited to cancellation of ISF eligibility and pre- repurchase securities sold to the Bangko Sentral under an Extended iSF availment, are governed by penalties and sanctions provided under Section 621 of

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