October 16, 2019 – The Bangko Sentral ng Pilipinas (BSP) chief Benjamin Diokno emphasizes the need for a collaborative approach in regulating fintech.
In a speech during the Finance Executives Breakfast Roundtable at the Grand Hyatt Hotel BGC, Sec. Diokno emphasizes the 3 principles that shape how the BSP regulates fintech:
- Ensure regulation is risk-based, proportionate, and fair;
- active multi-stakeholder collaboration;
- Ensure innovations must work for the benefit of consumers, especially the most vulnerable ones.
These principles make way for the BSP’s 3-lane Fintech roadmap:
- First Lane (Collaborative Engagement): Engage with fintech players and innovators through a flexible “test and learn” environment or regulatory sandbox. This enables the BSP to understand emerging business models and assessing risks. This will ensure consistency of policies and minimizing, “if not fully preventing”, regulatory arbitrage.
- Middle Lane (Capacity Building Initiatives):
- Establish Financial Technology Subsector (FTSS) to institutionalize the operational and cyber-resilience of the financial system. Under this, the Technology Risk and Innovation Supervision Department (TRISD) is in charge of cybersecurity surveillance, promote digital and fintech innovation, and conduct and maintain IT supervision of regulated entities.
- The Payment Systems Oversight Department (PSOD) is responsible for maintaining the efficiency and reliability of the national payment system.
- Create and implement AI and Machine Learning Solutions for regulatory and supervisory process.
- Third/Final Lane (Commensurate Regulations):
- Apply the same supervisory objectives of the BSP to fintech.
- Ensure level playing field.
- Ensure that the BSP will not hamper the innovation with unwarranted and excessive compliance requirements.
Mr. Diokno made note of the BSP’s key issuance in support of their fintech initiatives:
- Circular No. 1022 – updates the rules in relation to the PhilSys ID and allow the use of technology-aided Know-Your-Customer process.
- Circular No. 1033 – streamlines the process of securing licenses to engage in Electronic Payments and Financial Services.
- Circular No. 1039 – simplifies the registration requirements of Money Service Businesses and Pawnshop Operators.
Mr. Diokno recognizes that fintech goes beyond the BSP as it is a pioneering solution across industries under the regime of different regulators of the financial sector. That is why a Fintech Committee is formed by the 4 financial regulators of the country:
- Bangko Sentral ng Pilipinas (BSP)
- Securities and Exchange Commission (SEC)
- Insurance Commission (IC)
- Philippine Deposit Insurance Commission (PDIC)
The Committee will streamline the regulatory response to fintech innovation. According to the BSP chief, this fintech committee is now at the initial stage of crafting a Cooperative Oversight Framework which will institutionalize their collaboration and clarify regulations to all supervised and would be supervised entities.