By Lee C. Chipongian

The Bangko Sentral ng Pilipinas (BSP) is imposing what it called a “hard deadline” of June 30, 2018 for all banks to shift to the EMV technology or face grave monetary penalty.

A BSP memorandum order signed on June 9 contained supplemental guidelines on EMV migration to speed up banks’ compliance which originally had a deadline of January 1, 2017, as well as punitive actions for non-compliance. However, due to the sheer volume of cards to be replaced and the delays in the technology shift, most banks have yet to reach completion of EMV-related requirements.

The BSP defines “full compliance” as upgrades and enhancement for EMV-related activities, the replacement of ATM and POS terminals from magstripe credit and debit/prepaid cards, and distribution of EMV-compliant cards. A non-complying bank will be considered in “serious offense” and will be slapped with monetary sanctions.

For banks that will be non- or partially-compliant to EMV requirements, they have to set aside provisions – which will be reviewed every quarter – to cover probable fraud losses “that may arise from counterfeit fraud or skimming attacks,” said the BSP.

To determine the amount for fraud loss, banks will use a loss probability rate and the outstanding balance of the cards or its credit limit using September 30, 2017 as end-date. “In the interim, non or partially-compliant (banks) are mandated to book provisions for probable fraud losses September 30 until full compliance is achieved.”

The BSP explained that the loss probability rate can be determined by the following: Historical counterfeit card fraud losses; customer behavior; nature of products, services and customer relationships; and degree or extent of EMV compliance of card-accepting terminals.