By Lee C. Chipongian
The Bangko Sentral ng Pilipinas (BSP) has made it easier for banks to apply for special licenses for establishing branches to encourage more network expansion.
In a statement, the BSP said they have revised guidelines that streamlined the licensing requirements from the setting up of regular branches, branch-lite units or BLU, and other special authorities. It said that the approval process is a risk-based approach to “promote ease of doing business.”
The revisions covered the classification of licenses for special authorities such as Types A, B and C licenses. “The requirements set out for each category are proportionate to the magnitude of risks that may arise from engaging in a specific activity and take into account the capability of the BSFI (BSP-supervised financial institutions) to manage the risks.”
The changes are in the standard documentary requirements and fee structure for all licensing applications. For example, for areas that the BSP previously tagged as restricted locations such as Makati, Mandaluyong, Manila, Parañaque, Pasay, Pasig, Quezon and San Juan, the special licensing fee for branches and BLU has been removed. This is to “encourage BSFIs to expand their branch network and consumer touch points and ultimately promote financial inclusion.”
The approved guidelines cover the first set of special authorities with streamlined licensing requirements, added the BSP, and this is to “promote efficiency and reduce business costs.”
In the statement, the BSP said “activities with Type A license that include establishment and sale of branches/BLU, equity investment in allied and non-allied undertaking, trust and other fiduciary business, among others, are likely to expose the BSFI to increased risks.”
As such, Type A license have three basic prudential criteria for good governance and effective risk management systems, and would require prior BSP approval. Applicants should have a CAMELS rating of at least “3”, a governance and independent control functions that meet what is considered appropriate for the BSFI, and compliance with BSP directives, according to the central bank.
For Type B license, while the BSP is not imposing the prudential criteria, it is maintaining prior BSP approval. Type B licenses cover the conversion to a lower bank category and amendment to the corporate structure. “These activities are related to the primary banking license granted hence, the application will be evaluated regardless of the risk profile of the BSFI,” said the BSP.
Type C license, in the meantime, does not need BSP prior approval because, as the BSP explained, “these are largely part of business decisions made to manage operations” and tha BSFI only needs to notify the BSP that it intends to engage in Type C activities such as branch relocation, permanent closure or cancellation of existing license.