The Bangko Sentral ng Pilipinas (BSP) will stop accepting digital bank license applications by next week and will close the window for three years after limiting the number of digital banks in the country to just seven.
“The judgment of the Monetary Board is that we will keep it close for three years so that we can closely monitor and we can gain experience on digital banking,” said BSP Governor Benjamin E. Diokno during his weekly press chat.
“If there is a need for lifting the limit we’ll do so but if on our judgment, seven is enough then there will be no additional digital banks in the future. In other countries they have also limited the number of digital banks,” he added.
The window for digital bank license application will be closed until 2024.
The BSP has already granted five digital bank licenses since the circular for the establishment of digital banks was released eight months ago. The approved applicants for new digital banks are UNObank, UnionDigital of Union Bank Corp. and GOtyme. The first two digital banks approved were conversions such as the government-owned Overseas Filipino Bank and Tonik Bank – both have existing licenses as thrift and rural banks. Tonik Bank and UNOBank are both Singaporean banks while GOtyme is a partnership between JG Summit Holdings and a South African banking group.
Diokno said there are two pending applications that are still being processed and they have at least seven days to complete all requirements.
Since there is just one week left for new submissions, Diokno doubts there will be time for any latecomers to be considered because applications received before August 31, 2021 will be dealt with on a first-come, first-served basis.
The applications received on or before Tuesday next week with documentary deficiencies or which do not meet the BSP’s pre-qualification criteria will be returned and will not be subject to further processing, he said.
“If you are thinking of applying at this time, there are a lot of documentary requirements that you may not be able to do that within the next few days,” said Diokno. Still, applicants that are able to submit the complete documentation on or before the deadline will be processed.
The BSP is limiting the number of digital banks to allow them the space to closely monitor the performance and impact of digital banks to the banking system and their contribution to the financial inclusion agenda, said Diokno. “We need to ensure that there is healthy competition among banks, enabling them to offer innovative and competitive financial products and services,” he added.
From date of Monetary Board approval, applicant banks are given a year to complete pre-operating requirements and commence banking operations. Existing banks converting to digital banks should complete the transition within three years from date of acquiring a Monetary Board approval.
Digital banks, which will require at least P1 billion capitalization, 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 BSP issued Circular No. 1105 last December 2020 for the establishment of digital banks. It is the BSP’s seventh bank category.