The Bangko Sentral ng Pilipinas (BSP) has lifted the three-year moratorium on the establishment of digital banks in the country and will expand the number of online-only banks from the current six to 10 by early 2025.
BSP Governor Eli M. Remolona Jr. said Thursday, Aug. 8, that they will still limit the number of digital banks to be able to have better control in monitoring and supervising how the neobanking sector will grow and develop, and to ensure that only banks with sufficient capabilities and digital solutions will be approved.
“With this limit, the BSP can closely monitor developments in the digital banking industry, obtain broader perspective as these banks mature further in their operations, as well as assess the impact of the entry of new players on the banking system,” said Remolona.
The BSP issued the Digital Banking Framework in December 2020 and imposed a temporary ban effective Aug. 31, 2021 on digital banking license application after initially granting only six licenses.
But by Jan. 1, 2025, BSP’s Monetary Board or its policy-making arm, will lift the moratorium and allow a maximum of 10 digital banks to operate in the Philippines.
In approving new digital bank licenses, the BSP will include the conversion of an existing bank’s license to digital bank license.
The BSP is expected to subject the next four new digital banks to a “rigorous licensing process” based on its value proposition, business models, and resources capabilities.
In addition, the applicants will also have to be reviewed for the following: compliance with the standard licensing criteria which encompasses the assessment of the transparency of banks’ ownership and control structure; suitability of shareholders, fitness and propriety of directors and senior management; adequacy of capital; and strategic and operating plans including an appropriate system of corporate governance and risk management.
According to the BSP, applicants with the capacity to meet the minimum criteria, plus a “unique value proposition” or the capacity to develop new and innovative business models not currently seen in the banking sector, will be considered as candidates.
“Applicants must bring something new to the table. We want to see unique product and service offerings that are different from that offered by the existing market players. These offerings should have significant potential to reach broader clientele, particularly the untapped or underserved market segments,” said Remolona.
“We have based our decision from our assessment of the operations of digital banks,” he added.
The BSP chief also noted that the BSP “took into consideration the digital banks’ financial soundness” and its compliance with the policy objectives of the BSP’s digital banking framework.
A digital bank 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 in the Philippines to receive and address customer complaints or issues.
In 2020, the BSP ruled that the establishment of a digital bank will require P1 billion minimum capitalization. This was lower than the required P3 billion to P20 billion for other banking categories such as the universal and commercial banks.
The six digital banks currently in operation are: government-owned Overseas Filipino Bank Inc. of the Land Bank of the Philippines; Tonik Digital Bank of Tonik Financial Pte Ltd. of Singapore; MAYA Bank of the PLDT Group; UNObank Inc. of Singapore; UnionDigital Bank of Aboitiz-led Union Bank of the Philippines; and GoTyme Bank Corp. of the Gokonwei Group.
These six digital banks became fully operational in late 2022 to 2023.
Before the BSP released the digital banking framework in 2020, there are already two existing digital banks in the country -- Malaysia’s CIMB and Dutch-owned ING. The two foreign banks, however, did not apply for a BSP digital bank license.