The Bangko Sentral ng Pilipinas (BSP) is in the last stage of sifting through the rules and regulation of digital banking in the country and could start issuing licenses earlier than expected.
In a recent update, BSP Governor Benjamin E. Diokno said they have almost wrapped up all the loose
ends and will soon issue the “enabling policy for fully digital-oriented banks”. Once completed, digital banks will be the BSP’s seventh bank classification that will be “distinct from the other bank types.” The circular is expected to be released this month or in December, at the latest.
“We are now refining our digital banking framework, based on comments received from both internal and external stakeholders,” he said. Industry comments on the draft circular on the guidelines on the establishment of digital banks — first circulated in the industry in July and then again for an updated version in October — have all been submitted to the BSP in mid-October.
Diokno said that with digital financial services now the “new norm”, the BSP is proactive in establishing a regulatory environment that is supportive and conducive of digital innovations.
“Digital banks will have minimal or zero-reliance on physical touchpoints, since they will conduct end-to-end processing of financial products and services through digital platforms and electronic channels,” he said. “Instead of putting up a branch or a branch-lite unit, these banks will only be allowed to establish an office dedicated to receiving and addressing customer concerns.”
Earlier, Diokno said that in deciding how many they will approve for digital banking license, this will be based on quality versus quantity.
“This means that we will continue to adopt prudential standards when granting a digital bank authority, permitting only applicants meeting our financial and risk management requirements,” he said, adding that with the establishment to digital banks, “we have embedded security standards in our regulatory frameworks for the protection of both the BSP-supervised financial institutions and their customers.”
Diokno said the BSP preferred applicants that will be tenacious and resilient enough to withstand risks
such as fraud and cyberattacks. “Essentially, we’re looking to attract players with strong value proposition, sufficient financial strength, management expertise and excellent risk management which could be our ‘tenacious’ partners in achieving the shared goal of onboarding more Filipinos in the financial system,” he said previously.
These banks, which are proposed to have a minimum P1 billion capitalization, are expected to have cyber resilience and will advance the financial sector’s digitalization.
Part of the proposed circular is to allow existing banks with traditional brick and mortar branches to convert to digital banks. It includes a transitory provision where existing banks can convert to become a digital bank within three years from date of approval.
The BSP said a digital bank is still confined to a digital platform and/or electronic channels with minimal to no reliance on physical touchpoints. It will not have a branch or branch-lite unit but it can offer offer financial products and services through cash agents and other delivery partners. However it will be required to keep a head office in the Philippines as its main point of contact and as a “central hub for receiving and resolving customer complaints.”
A digital bank will be allowed to perform the following: grant loans; accept savings and time deposits, including basic deposit accounts; accept foreign currency deposits; and to invest in readily marketable bonds and other debt securities, commercial papers and accounts receivable, drafts, bills of exchange, acceptances or notes arising out of commercial transactions.
It can also act as correspondent bank and collection agent, allowed to issue electronic money products, and credit cards, and it can buy and sell foreign exchange and microinsurance products.