Group 3

PHILIPPINE
CLEARING HOUSE
CORPORATION
History
 29 July 1977
 The Philippine Clearing House Corporation (PCHC) was
incorporated as a private corporation co-equally owned by all
commercial banks enlisted as members of the Bankers
Association of the Philippines (BAP)

 Its main purpose was to automate the Check Clearing System

thru the medium of MICR-encoded checks

*MICR ( Magnetic Ink Character Recognition) – is a technology used to

verify the legitimacy or originality of paper documents, especially checks.
Special ink, which is sensitive to magnetic fields, is used in the printing of
certain characters on the original documents.
 06 June 1980

 With the Clearing House Rules and Regulations approved

and subsequently the Arbitration Mechanisms in place,
the PCHC commenced its LIVE and stood proud being
the FIRST Automated Check Clearing House in Southeast
Asia.
 Some of the electronic-based payment system services
extended by PCHC:

o Electronic Peso Clearing and Settlement System (EPCS)

o Philippine Domestic Dollar Transfer System (PDDTS)
o Project Abstract Secure System (PASS)

 Automated facility was introduced in Metro Manila

processing only while the rest of the other clearing regions
were still under manual processing managed by BSP.
 Before the end of the decade, the Electronic Check Clearing
System (ECCS) was introduced to complement the full
computerization project of the Bangko Sentral ng Pilipinas
(BSP) Accounting Department which required the early
submission of clearing results . 
 With its mission of implementing a single clearing region for the
entire country, PCHC proceeded to automate and took over the
Inter-Regional Clearing Operations then fully managed by the BSP.

 The Out-Of-Town bank branches which used to operate under a

mail-based exchange were also included as part of the Inter-
Regional Clearing Exchange dramatically reducing the clearing
period from 30-45 days to 5-7 days.
 At the end of 2004, PCHC further expanded its operational
coverage by integrating seven additional clearing regions
 One in Luzon
 Six regions from the Visayas and Mindanao area into what is now known
as the “Greater Manila Clearing Exchange”

 thereby accelerating the velocity of funds from 5-6 days to a

uniform of three (3) days within the covered regions.

 With the automated clearing process now with nationwide

coverage, check clearing was shortened to:
 3 days for GMA and Integrated regions
 4 days for regional clearing
 To complete the expansion project, PCHC has initiated the
groundwork for the conversion of the remaining BSP
operated clearing regions into MICR/ECCS operation.

 PCHC now has a nationwide network of sixty-nine (69), Twenty-

nine (29) Greater Manila/Integrated Regions and Forty (40)
Regional “local” Exchange Centers, defined clearing regions
processing a daily average of 704,000 clearing items from more
than 5,600 participating bank branches. 

 PCHC continues to reconfigure and retool its facilities to provide

new clearing and settlement services for the banking industry.
Member Banks of PCHC
 1st Valley Bank   Century Savings Bank 
Al-Amanah China Banking Corporation 
Islamic Investment Bank  China Bank Savings, Inc. 
Asia United Bank  CTBC Bank 
Australia & New Zealand Bank  Citibank, N. A. 
Banco De Oro Unibank, Inc.  City Savings Bank 
Bangko Sentral ng Pilipinas  Citystate Savings Bank, Inc. 
Bangkok Bank Public Co., Ltd.  Deutsche Bank 
Bank of America  Development Bank of the Philip
Bank of China  pines 
Bank of Commerce 
Bank of Makati  East-West Banking Corporation
Bank of the Philippine Islands   
Bank of Tokyo-Mitsubishi UFJ, Ltd. 
Bank One Savings & Trust Corpora Equicom Savings Bank 
tion 
First Consolidated Bank 
BDO Private Bank, Inc.  GSIS Family Bank 
BPI-Direct Savings Bank  Hongkong
BPI Family Bank  and Shanghai Banking Corp. 
HSBC Savings Bank 
ING Bank N.V. 
 Korea Exchange Bank   Philippine Trust Company 
Landbank of the Philippines  Philippine Veterans Bank 
Luzon Development Bank  Planters Development Bank 
Malayan Savings & Mortgage Bank  PNB Savings Bank 
Maybank Philippines, Inc.  Producers Savings Bank Corp. 
Mega Int’l Commercial Bank Co., Ltd. Queen City Development Bank 
  RCBC Savings Bank 
Rizal Commercial Banking Corp. 
Metropolitan Bank and Trust Compan Robinsons Bank Corporation 
y  Security Bank Corporation 
Security Bank Savings Corp. 
Mizuho Bank, Ltd.  Shinhan Bank 
One Network Bank  Sterling Bank of Asia, Inc. 
Optimum Development Bank, Inc.  Sumitomo Mitsui Banking Corp. 
Palawan Development Bank, Inc.  The Standard Chartered Bank 
Penbank  Tong Yang Savings Bank, Inc. 
Philippine Bank of Communications  UCPB Savings Bank 
Philippine Business Bank  Union Bank of the Philippines 
Philippine National Bank  United Coconut Planters Bank 
United Overseas Bank Philippines 
Philippine Postal Savings Bank 
Wealth Development Bank 
Philippine Savings Bank 
World Partners Bank 
Check
 is a written, dated and signed instrument that contains an
unconditional order from the drawer that directs a bank to
pay a definite sum of money to a payee. The money is
drawn from a banking account, also known as a 
checking account.
Parts of a check
 1. Account Holder Name, Account Holder Address, Account Holder Phone
number, and Account Holder Email Address can appear in this section of the
check called the Address Field.


2. The Bank Name, City and State of the processing facility, or the city and state
of the account holder's branch, the bank's phone number, the banks website
address and/or the bank's email address may appear in this section.  This
section can also be located above field 7, the memo field.


3. The check number appears at the top right, shown here as 101.

4. Pay to the order of: This section should have the name of the person or
company that is being paid.  The name of the party getting the money.

5. The amount written numerically.  If this check were for one hundred dollars,
within the box labeled "5" in the example above, it should read, "$100.00"
 6. The amount written in words.  If this check were for $100, in the blank labeled "6" above, you would
write, "One Hundred and 00/100".  Many people will then draw a line to the preprinted "Dollars" to
discourage alteration.  If the check were for $101.59, it would be written, "One Hundred One and
59/100".

7. The 'For" or "Memo" blank can be left blank, or you can enter any information at all.  Some people
note an account number or invoice number that is being paid with the check, others may just write, "For
Birthday" or other note to remind them what the check was for.  This field is not read by the bank and
does not change how the check is processed.

8. The signature line.  This is where the account holder would sign the check.  On a check draft, the
signature is not required, although it is usual to have a signature disclaimer in this section.

9. This MICR field is the Routing Number.  This is the 9 digit code that routes the check to the issuing
bank.  The routing number should match the bank name and the fraction code.

10. The account number.  This field is an MICR field that lists the account holder's account number at
the bank.  

11. Fraction Code - this field is the fraction that denotes the routing for the check.  The fraction code is
another way to write the 9 digit routing number.  If the MICR line on the check is mutilated, the fraction
code will be used in its place.

12. The date field.  Fill this in with the date the check is created.
Clearing Process
  is the process of moving a cheque from
the bank in which it was deposited to the
bank on which it was drawn, and the
movement of the money in the opposite
direction.
Classification
 Domestic Level
Head Office Clearing

Interbank Clearing

 International Level
Clearing House Interbank Payment System
Check Clearing Process
Services offered by PCHC
 ELECTRONIC CHEQUE CLEARING SYSTEM

 introduced in 1999 to address the requirement of the Bangko Sentral ng

Pilipinas (BSP) to determine the clearing results before 5:00 PM

 It was a turning point as the new system provides online communication

linkage between the clearing participant banks and the PCHC

 The transmission of electronic check data by the bank/branches to the

PCHC ECCS Host Computer for netting purposes enable expeditious
generations of clearing results even before the physical checks arrived at
PCHC, ushering new clearing concepts and procedures that directly
addressed possible settlement risks.
 Process
 When payment is made in a form of a check, payee may either present it
over the counter for encashment (to drawee bank/branch) or deposit the
same to his/her bank.

 Checks paid over the counter by drawee banks will not pass thru PCHC,
but, if the check is deposited by payee to his/her bank, it will go thru the
clearing process using the PCHC facility.

 Checks deposited by a client his bank which is not the drawee of the
check, will be presented by the depository bank to the drawee bank via
PCHC as Outward Items
 Banks deliver their outward checks for clearing to PCHC for processing and
routing

 PCHC will then read the MICR code lines, capture the images of these
checks and then sorts by bank.

 It would then reconcile unbalanced batches in order to prove the accuracy

of clearing work from the banks.

 The checks are further sorted by branch level down to the account and
check number sequence.

 These fine-sorted items will then be sent to their drawee banks as Inward
Items verification (of authenticity) and proper disposition (pay or not pay).
 CHECK IMAGE CLEARING SYSTEM (CICS)

 The PCHC adoption of check truncation shall be called Check Image

Clearing System 

 CICS shall no longer include the original paper check from the collection
or return process.

 Instead of the paper check, the digital image thereof will be transmitted
electronically to the drawee bank for collection of its amount or to the
depository or presenting bank in case of dishonor of the check. 

 This will eliminate the need to transport paper checks thus, making
processing of check payments faster and more efficient.
 Advantages of using CICS
 Paper check processing and clearing costs are increasing, while
electronic and image processing costs decrease.

 Float reduction is beneficial and optimized by Image Exchange.

 Today’s check transportation alternatives will increase in cost and risk.

 Value drivers in financial institutions are focusing not only on new

product opportunities, but also on process improvements and enhanced
customer satisfaction.
 ELECTRONIC PESO CLEARING SYSTEM

 is an interbank account-to-account fund transfer system that supports bulk,

recurring, low-value, less time sensitive payment and collection transactions.

 In July 2002, the BSP, BAP and PCHC signed a Memorandum of Agreement for
the development and implementation of the Electronic Peso Clearing and
Settlement System (EPCS), with PCHC designated as the exclusive service
provider.
 Using data communication lines, participants electronically transmit transactions by
batches to the EPCS Host Computer.

 Following the prescribed cut-off time for electronic transmissions, a netting process will
then be performed by PCHC.

 Net clearing positions are forwarded by PCHC to the Bangko Sentral ng Pilipinas for
posting to the participant banks’ respective DDA accounts.

 The banks’ clearing results and inward data files and reports are also generated by
PCHC and made available to the participants for downloading and posting the
accounts of the beneficiaries/depositors.
 PHILIPPINE DOMESTIC DOLLAR TRANSFER SYSTEM
(PDDTS)

 In 1994, the diskette method of funds transfer was converted into an electronic
mode thus the birth of the Philippine Domestic Dollar Transfer System (PDDTS).

 The participating banks send domestic Interbank US Dollar Transfers thru a

settlement bank in either of two (2) ways or both as they deem convenient:

○ Gross Settlement Real Time (GSRT or Intra-day).

○ End-of-Day (EOD Netting) – a system that supports bulk, recurring and less
time sensitive payments.
 While GSRT transfer instructions are sent directly by banks to the settlement bank, in
EOD Netting, participating banks transmit transactions to PCHC by batches.

 Following the prescribed cut-off time for transmissions, a netting process will then be
performed by PCHC.

 Net clearing positions are downloaded by the settlement bank for posting to the
participant banks’ respective US Dollar deposit accounts.

 The banks’ clearing results and inward data files and reports are also generated by
PCHC and made available to the participants for downloading.
 In 2015, BAP renewed the appointment of its current settlement bank as the exclusive
Settlement/Depository Bank for PDDTS Transactions.

 This time however, another entity the Philippine Central Depository Inc. (PCD) was
designated as the service provider for the GSRT while PCHC retained its role as
service provider for the End-of-Day Netting Method. This set-up has been further
renewed in 2003 and again in 2005.
 PROJECT ABSTRACT SECURE

 Bureau of Customs/Bankers Association of the Philippines

(BOC/BAP) PROJECT ABSTRACT SECURE SYSTEM (PASS)

○ The Authorized Agent Bank (AABs) represented by the Bankers Association of

the Philippines (BAP) accepted the obligation of collecting customs duties and
taxes and the responsibility to remit accurately and timely to the Government
Treasury all such collections. Thus, the BAP entered into an Agreement with
the Bureau of Customs (BOC) to adopt and implement Project Abstract Secure
(PASS).

○ a system that provides adequate security safeguards to the collection of

revenues, ensure the propriety of official documents and put in place a system
which will guarantee that access to information on such transactions shall be
limited only to the duly authorized representatives of the BAP and BOC.
 Philippine Clearing House Corporation (PCHC) was appointed as the exclusive service
provider for the encryption and transmission of the abstracts of collection reports from
the AABs to the BOC.

 Implemented in October 1996, PCHC provided a secure electronic messaging facility

between the BOC and the AABs for the collection and confirmation of duties and taxes
paid by the importers.
 ELECTRONIC FUND TRANSFER NETWORK (EFTN)

 The EFTN will operate as a processing and delivery hub for EPCS and
PDDTS transactions providing for the distribution and settlement of
electronic credits and debits among all participating banks.

 EFTN will operate in a real-time, batch processing mode. Transaction

files are delivered to the BEFTN clearing system via the bank’s
Presenting Bank Module (PBM) server.
 The PBM server processes the EFT files received from the bank in order
to detect any inconsistencies, duplicate, or stale files at the earliest
opportunity.

 This is to allow the originating bank sufficient time to fix the errors and
resubmit the file.
 Items processed in the EFTN will be distributed to their intended receiving banks. All
transactions will be calculated into a single multilateral netting figure for each individual
bank.

 Final settlement will take place using accounts that are maintained with the BSP for
Peso and Citibank for Dollar.

 Participating banks in the EFTN Network will be inter-connected via communication

lines.