BSP could lift 3-year embargo on digital bank application anytime – Diokno

Published August 25, 2021, 6:00 AM

by Lee C. Chipongian

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said they could be flexible in imposing the ban or lifting the suspension on digital bank license application, and could in fact lift the three-year moratorium anytime.

“Such limit on the number of digital bank licenses may be modified or lifted at any point, as warranted, subject to review and approval of the Monetary Board,” said Diokno in an email.

An August 19 BSP memo implemented its decision for the “closure of window” for the establishment of digital banks in the country, and limiting the number of digital bank licenses to only seven for three years. The last application the BSP will receive for digital bank license is on Tuesday, August 31. Diokno formally announced the digital bank license moratorium on the same day.

BSP Governor Benjamin E. Diokno

For now, Diokno said the application window will be closed until December 2023, or three years from the effectivity of Circular No. 1105 on the Guidelines on Establishment of Digital Banks, which was approved last December, 2020.

“The BSP is cognizant of the benefits of a flexible regulatory approach in the adoption of technological innovations in financial services that expands reach to the unbanked and underserved segments of the country,” he said.

“The three-year time horizon will allow the BSP to assess the financial and operational performance of newly approved digital banks, their impact to the banking sector, and their effectiveness in achieving the financial inclusion goals,” added Diokno.

The BSP has so far approved five digital bank licenses: Overseas Filipino Bank of Land Bank of the Philippines; Tonik Bank of Singapore; UNObank of Singapore; UnionDigital of Union Bank of the Philippines; and GOtyme of Robinsons Bank Corp. The first two digital banks approved were conversions since OF Bank and Tonik Bank have existing licenses as thrift and rural bank, respectively.

The applications received on or before August 31 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. Late applications will be processed on a first-come, first-served basis.

Digital banks are only required a minimum P1 billion capitalization. They 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.

BSP Deputy Governor Chuchi G. Fonacier said over the weekend that there are two more local-owned banks that are up for review this week and will have the last two slots for the seven-bank limit.

Fonacier said one of the applicants is an existing bank “converting to digital bank” while another is a “local player forming a digital bank.” These last two applicants could be Philippine National Bank which is interested in setting up a digital bank unit, and Rizal Commercial Banking Corp. that is also planning to spin off its DiskarTech app as a digital bank subsidiary.

Any existing banks applying to shift to digital banking, once approved by the BSP, are given three years to complete conversions including the closure of branches or branch lite units.