2 digital banks to start this year - BSP

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno expects to have two online-only banks with digital bank license to start operation by the second half of 2021, including Overseas Filipino (OF) Bank.

Diokno said another two new digital banks with no existing banking license from the BSP are expected to start their business by middle of 2022 after completing the BSP’s pre-operating requirements and compliance to the P1 billion minimum capital.

BSP Governor Benjamin E. Diokno (Credit: BSP photo)

So far, Diokno said they have received four formal applications for digital bank license including OF Bank, a subsidiary of state-owned Land Bank of the Philippines, and this application has been approved last March 25.

Of the four applications, two are from new players and two including OF Bank are existing thrift and rural banks that will convert to digital banks.

“For both new players and converting banks, the time frame for application to commence their operations under digital bank license depends on their readiness and full compliance with existing pre-operating requirements,” said Diokno during his weekly virtual press briefing. “And, from date from Monetary Board approval, they are given a year to complete pre-operating requirements and commence banking operations.”

As for new digital banks, Diokno said they “expect them to operate maybe by mid-2022 but for those existing banks that already meet the definition of a digital bank and are planning to convert their existing banking license, we anticipate their start of operation under digital bank license within the second half of this year.”

Diokno reiterated that they are not limiting the number of digital banks but initially, they would like to farm out five digital bank license.

“Are we limiting the number of digital banks to five? No such thing but initially we want to look at the experience first with five digital banks,” he explained.

“What we want to do is learning to walk first before running, so we want to get as much experience as possible with digital banks before we can consider more players in the market,” Diokno added.

The first bank with an approved digital bank license , OF Bank, used to be Philippine Postal Savings Bank. It 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. “You can just imagine this will be focused on around 10 million overseas Filipinos, so that will be to their advantage,” said Diokno.

Another applicant is Tonik Digital Bank of Singapore which is also converting its rural bank license into a digital bank license. A unit of Tonik Financial PTE Ltd, Tonik Digital Bank 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.