BSP, BAP bat for faster clearing of checks

MANILA, Philippines - A bill that will fast track the clearing process of checks from the present three to five days to just one day is being finalized by regulators and stakeholders and is expected to be filed in Congress within the year, a central bank official said.

“The BSP (Bangko Sentral ng Pilipinas) and BAP (Bankers Association of the Philippines) formed a technical working group to draft the bill. They are finalizing it and will be submitting the proposed bill for the consideration of the Monetary Board,” BSP Deputy Governor Juan de Zuñiga told The STAR last Friday.

“We are looking at filing the bill in Congress by the end of the year,” he added.

The bill will amend certain provisions of Republic Act 2031 or the Negotiable Instruments Law, which provided that clearing of checks will be facilitated only once “original copies” of the document are received by clearing houses.

Under the Negotiable Instruments Law, submission of negotiable instruments such as bank checks should be done personally “by the holder or by some person authorized to receive payment on his behalf,” in a “proper place” and “during banking hours.”

“Under the check truncation (process), the electronic image of a check will be sufficient basis for clearing,” De Zuñiga explained.

“In that way, if for example, you deposit a check to your account, it will no longer take three-to five days. It will already be credited the next day,” he added.

Faster clearance of checks will be in line with global practices, De Zuñiga said, explaining further that a reduced time of transaction “mitigates risks of unsettlements and uncertainties.”

“If the clearing period is three days or five days, there is uncertainty on the part of the check issuer if the check he issued will be cleared,” De Zuñiga explained.

“In the same way, counterparties want earlier settlement. If for example, you issued a check to buy a house, the real estate company would want to make sure immediately if the checking account has enough funds,” he added.

Latest data from the Philippine Clearing House Corp. website showed there were a total of 172.44 million in checks cleared in 2010, 2.71 percent higher than the previous year’s 167.89 million.