The Bangko Sentral ng Pilipinas has approved the second set of guidelines for digital banks following the release of the digital bank framework in December 2020.
Screenshot from BSP
The approved guidelines set out the BSP’s supervisory expectations with regard to corporate and risk governance of digital banks as well as the applicable prudential regulations on capital, leverage, and liquidity.
The guidelines also prescribe the prudential limits on equity investments in allied undertakings, required reserves against deposit and deposit substitute liabilities, and reporting requirements of digital banks.
Digital banks, unlike brick-and-mortar banks, have minimal or zero-reliance on physical touchpoints as their products and services are processed end-to-end through digital platforms or electronic channels.
“Due to its nationwide market reach resulting from the use of digital platforms or mobile applications in the banking services delivery, and ability to rapidly expand operations, this category of banks is considered as complex banks,” the BSP said.
“Consistent with this, the governance expectations, Basel III standards, and prudential reporting requirements applicable to universal and commercial banks shall also apply to digital banks,” it added.
The new rules provide that the BSP may require existing thrift, rural, and cooperative banks to maintain a minimum capital of P1 billion if the banks primarily offer financial products and services that are processed end-to-end through a digital platform and/or electronic channels similar to digital banks.
“This is to ensure that banks maintain sufficient capital to cover the risks that they assume. It also provides a level playing field among banks that leverage on digital platforms in delivering their financial products and services. Banks concerned shall be given ample time to build up capital and meet the new minimum capital requirement,” it said.
The BSP has authorized a total of six digital banks to operate in the Philippines, namely GoTyme Bank, Maya Bank, Overseas Filipino Bank, Tonik Digital Bank, UnionDigital Bank, and UNObank, Inc.
“We are proud to take a leap forward towards a digital economy with the full operation of digital banks this year since this is seen to usher to a technology-driven and inclusive financial ecosystem that is resilient and capable of promoting a customer-centric banking experience,” BSP governor Felipe M. Medalla said.
Meanwhile, the BSP said it is promoting targeted digitalization efforts to ensure the continued recovery of microfinance institutions (MFIs) from the pandemic.
During the 2022 annual conference of the Microfinance Council of the Philippines Inc. (MCPI), Medalla cited Paleng-QR, an interagency program that aims to expand QR payments among small merchants; ongoing efforts to develop a basic merchant account framework, and satellite technology testing for two rural banks in Batangas.
He said MFIs are showing signs of recovery with loan growth up 4.1 percent in 2021 following a 2.50 contraction in 2020 and repayment figures rebounding to 84 percent in February 2021 from 56.5 percent in Q2 2020.
“It’s hard to think of financial inclusion without looking at microfinance,” he said. “I’m glad to hear that you consider the BSP as your number one ally. From our point of view, you are also a very important ally of the BSP.”
