BSP may reopen digital bank window sooner

Published September 28, 2021, 5:08 PM

by Lee C. Chipongian

The central bank could reopen the window for digital bank license applications within a year if additional neobanks are needed, according to Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno.

Diokno announced this on Tuesday, Sept. 28, despite closing the neobank window for three years and imposing a limit to the number of digital banks to just seven.

Diokno said there is no timeline. “Maybe we will assess this on a yearly basis on whether there is a need to reopen,” he said in a webinar on digital banks hosted by the Management Association of the Philippines .

“We can open it within a year or two years, or three years, depending on the evaluation (of the BSP),” he told MAP members and the first six digital banks that were also in the forum panel.

In the meantime, Diokno said of the nine applicants that submitted applications before the window was closed at the end of August, only one more digital bank license will be granted. This could be Lucio Tan’s Philippine National Bank which intended to convert its existing thrift bank unit into a neobank. “We are closely monitoring the completeness of the application but it will be announced soon,” said the BSP chief, referring to the unnamed seventh digital bank.

Based on an update, the country’s seventh digital bank has apparently changed its application with the BSP. The existing bank that is applying to convert into a digital bank has revised a detail in their proposed digital banking unit and the BSP is confirming its revised status.

The BSP has closed the window for digital bank license applications on August 31 and will no longer accept new applicants for neobank license for the next three years or until end-December 2024. They have imposed a limit of only seven banks for the digital banking space.

The BSP limited the number of digital banks to just seven to enable them to closely monitor and develop expertise in the supervision of digital banks.

Diokno has said previously that the BSP will lift the moratorium on digital bank license applications if they have assessed a need for additional digital banks. But for now, seven is enough digital banks for the Philippine market, he said.

Six digital bank licenses were granted to the following: Overseas Filipino Bank of Land Bank of the Philippines (approved on March 25, 2021); Tonik Bank of Singapore (June 3); UNObank of Singapore (June 3); UnionDigital of Union Bank of the Philippines (July 15): GOtyme of Robinsons Bank Corp. (Aug. 12); and Maya Bank, owned by PayMaya of PLDT Inc. (Sept. 16).

Diokno in the webinar’s question and answer segment said some banks, despite not having a formal digital bank license, are “more or less” operating as digital banks but the Monetary Board of the BSP which he chairs, has decided to have a separate category for neobanks.

“But, they will be subject to the same prudential restrictions that we impose on other banks except that these banks will have a stronger IT character,” he said. One of the digital banking rules is the requirement that one of its directors should have a background in IT or e-commerce, and that one of the senior officers is also an IT or e-commerce expert.

Diokno said a digital bank’s capitalization requirement “is not trivial” since it will need P1 billion to get a neobank license.

The new digital banks have three years to actually operate as a digital bank. Some of the six banks will operate within a year while two are already up and running such as OF Bank and Tonik Bank.

BSP Governor Benjamin E. Diokno said reopening of digital bank license window may be reviewed every year