BSP to amend policy on return of ‘bounced’ checks

The Bangko Sentral ng Pilipinas (BSP) is amending its policy on the return of banks’ bounced checks.

In a statement, the BSP said that the planned reform forms part of its aim at further enhancing the efficiency and safety of the country’s payment system.

The central bank said that currently banks 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. 

This practice of retroactive dating, however, the BSP said “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.

With this, the central bank said it is revising the current policy to allow banks to return high-value, not sufficiently funded (NSF), and defective checks “as early as the day these are deposited.”

The move was aimed to mitigate settlement and liquidity risks that may arise from mismatch in the balances of banks’ settlement accounts due to the current policy.

The BSP, nonetheless, said that 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. Hence, aside from improving confidence in the check clearing and settlement system, the enhanced policy enables better fund management among check users,” the central bank said.

Moreover, the BSP said that in check clearing, banks shall 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 said the amended policy on checks is targeted to be implemented three months after the effectivity date of the policy, which would be 15 days after its publication. 

The BSP is yet to publish the issuance on revising the rules on bouncing checks.

Apart from amending the policy on returning “bounced” checks, the BSP is also reintroducing the “Intraday Settlement Facility” or ISF, which was known before as the PhilPaSSplus Intraday Liquidity Facility.

The change was meant to reflect operational changes arising from BSP’s adoption of global payment standards and the full automation of this system. 

“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,” the BSP said.—AOL, GMA Integrated News