The Bangko Sentral ng Pilipinas’ (BSP) five-only digital banks is not a long-term limit and can be lifted depending on demand and requirement, according to BSP Governor Benjamin E. Diokno.
“At the moment our policy is to consider among applicants the top five banks that we are willing to consider,” said Diokno. “Depending on our experience, we may expand the number of digital banks,” he said during the Asian Development Bank-hosted online discussion on BSP’s financial digitalization and inclusive COVID-19 recovery plans on Wednesday.
Diokno said the BSP will release five digital bank licenses but this does not mean they will stop at this number. “We’re looking into many applications for digital banks. (But) we want to go slow on this,” he added.
“We are not committed to just five digital banks in the Philippines,” stressed Diokno. “We can have more if there is a huge demand for it.”
Last March 25, the BSP granted its first digital bank license to Overseas Filipino Bank (OF Bank), a subsidiary of Land Bank of the Philippines. OF Bank, which used to be Philippine Postal Savings Bank, has an existing thrift bank license and is authorized to operate as a foreign currency deposit unit. It is already operating as an online-only bank since June 2020.
According to BSP Deputy Governor Chuchi G. Fonacier, Tonik Digital Bank is also converting its rural bank license into a digital bank license. It will be approved as the country’s second digital bank after it has complied with the P1 billion minimum capital requirement. The Singapore-based bank, a unit of Tonik Financial PTE Ltd, was granted rural bank license last September 2020 and officially started operation only in November last year.
Based on BSP rules, existing banks converting to digital banks should complete the transition within three years from date of acquiring a Monetary Board approval.
The central bank issued Circular No. 1105 last November 2020 for the establishment of digital banks which is the BSP’s seventh bank category. Digital banks will have minimal or zero-reliance on physical touchpoints but it will have to set up one office as central hub in the Philippines to receive and resolve customer complaints.
The P1 billion minimum digital bank capitalization is smaller compared to commercial banks with P2 billion to P15 billion capitalization depending on the location and number branches. A universal bank license should have P3 billion up to P20 billion. Thrift banks' capitalization is P500 million to P2 billion while rural banks is at least P50 million up to P200 million.
The BSP however could impose a higher minimum amount and capital ratio based on its assessment of the risk profile of the digital bank.