Philippine thrift banks are backing a central bank proposal to impose a ₱1 billion minimum capital requirement on lenders with highly digital business models, even as the industry continues to prioritize traditional brick-and-mortar growth.

Chamber of Thrift Banks (CTB) Convention Committee Chairman Manuel G. Santiago Jr. told reporters on the sidelines of the industry's annual convention on Wednesday, July 15, that the group supports the draft rule.

“We are in support of that. However, our main focus really is on our own industry,” Santiago said, adding that demanding higher capital from digitally intensive thrift banks is justifiable given their increased risk exposure.

“We agree that the higher the risk, the higher the capital requirement should be, and that, depending on the level of transactions, it should be supported by adequate capital,” Santiago explained.

He noted, however, that thrift banks still rely on physical branches as their primary touchpoint for customers. Digital technology, he emphasized, is meant to complement and enhance service quality rather than replace physical locations.

In 2025, the Bangko Sentral ng Pilipinas (BSP) released a draft circular outlining a tiering scheme based on the digital centricity of banks. Each tier reflects a higher level of digital operations, with stricter regulatory requirements applied as a bank’s digital complexity, scale, and risk exposure increase.

Under the proposed rule, thrift, rural, or cooperative banks categorized under Tier 3—where at least 75 percent of clients, funds, or transactions are handled through electronic channels—may be ordered by the BSP to convert into digital banks. Digital banks are required to maintain a minimum capital of ₱1 billion. This tier includes institutions utilizing digital onboarding, mobile-based deposits or loans, and electronic payment and financial services (EPFS).

Meanwhile, banks fall under Tier 2 if at least 50 percent of their clients are onboarded through digital channels, if half of their deposits or loans are sourced through digital services, or if at least half of their transactions are processed through EPFS.

Lastly, Tier 1 covers banks holding an EPFS license, allowing them to offer mobile banking with digital onboarding via electronic know-your-customer (e-KYC) and digital account funding.

One year after the draft's initial release, BSP Deputy Governor Lyn Javier confirmed to reporters during the event that the circular remains under review.

Amid the regulatory shifts, the industry’s total loan book breached ₱1.07 trillion as of May 2026, marking a 13.4 percent increase from ₱939.7 billion in May 2025. Santiago noted that the industry expects this robust growth to continue.

Last month, the BSP extended the maximum repayment term for salary-based consumption loans to seven years, up from the previous three years. The central bank stated the policy adjustment aims to make credit “easier to repay while still encouraging responsible borrowing.”

While the industry supports the extension, Santiago admitted there are concerns about "overburdening" borrowers and trapping them in debt cycles.

The central bank has since clarified that the seven-year window represents the maximum allowable tenor, not a mandatory fixed loan term. Lenders must still rigorously assess a borrower’s ability to repay by reviewing income sources, employment status, credit history, and the loan's purpose to ensure financial stability.

For the CTB, longer loan settlement extensions should be reserved for significant needs rather than general consumption. “Right now, it’s more for emergency situations such as hospitalization, home repairs, the purchase of a car, car repairs, and the like,” Santiago said.

On cybersecurity and fraud, Santiago stated that all CTB member banks are compliant with the Anti-Financial Account Scamming Act (AFASA). BSP-supervised financial institutions (BSFIs) were given until June to establish sophisticated fraud management systems (FMS) featuring advanced verification methods.