Mactan, Cebu — Digicentric financial institutions operating like digital banks should be regulated the same way to address market arbitrage, a Bangko Sentral ng Pilipinas (BSP) official said.

"If you're already behaving like a digital bank, you should be regulated like a digital bank, not like a rural bank. That’s why the intention really is to minimize the arbitrage," BSP Senior Director Melchor T. Plabasan said on the sidelines of the BSP-International Monetary Fund (IMF) 2024 Systemic Risk Dialogue in Cebu.

"If the BSP has a basis for us to convert their license, then we will require them. That means all the requirements for digital banks will have to be complied by these institutions like the 1 billion capital and other prudential requirements," Plabasan explained.

He added that the central bank is identifying which digicentric institutions can be considered as operating like digital banks, allowing for the transition of rural or thrift bank licenses into digital bank licenses.

Plabasan said new players are exploring the Philippine market, but the BSP will only accept new applications starting Jan. 1, 2025, after lifting its moratorium on granting digital banking licenses.

Currently, the BSP is seeing equal interest in license conversions and new foreign entrants.

“There are existing players who would like their license to be converted to a digital bank. And there are also foreign players that have signified interest to enter the Philippine market,” he said.

The central bank has received inquiries regarding legal and regulatory requirements. Once applications open, Plabasan said the assessment of existing players could be completed promptly.

Qualified applicants

Last August, the BSP lifted the three-year ban on the establishment of digital banks in the country and will increase the number of digital banks from six to 10.

BSP Governor Eli M. Remolona Jr. earlier stated that still limiting the number of players allow the BSP to monitor the digital banking industry, gain a broader perspective as these banks mature, and assess the impact of new players on the banking system.

Since the 2020 Digital Banking Framework, six digital banks operate in the Philippines: Maya Bank, Overseas Filipino Bank Inc., Tonik Digital Bank Inc., UNObank Inc., UnionDigital Bank, and GOtyme Bank Corp.

Four licenses remain for new entrants and converting players, but Plabasan said additional requirements must be met.

“They have to offer something new. This means that even if it's not four, we won’t fill all four licenses just to say there are four. If no one meets the additional requirements, we will stick with the existing number,” he clarified.

Plabasan said the BSP typically approves licenses within three to four months, allowing operations to begin in the same year if requirements are met, particularly the technology infrastructure.

He noted that both existing and new players will benefit from the additional requirements, as the goal is to minimize arbitrage.

"It's for their benefit,” he said. “We want to address arbitrage. It’s good for them, as some players already operating like digital banks will face higher requirements.”