BSP Updates Regulations on Digital Banks

BSP approved changes about digital banks and clarified the processes involved in the new industry.

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Editing by Nathaniel Cajuday

Almost a month after all six digital banks have started full operations, the Bangko Sentral ng Pilipinas (BSP) has recently approved the proposed changes in the establishment of digital banks and clarified prudential requirements, licensing, and documentation.

After almost a year after its proposal, BSP Deputy Governor Eduardo G. Bobier as officer-in-charge and the policy-making-arm of the central bank, the Monetary Board, approved Circular No. 1154, or the “Prudential Requirements Applicable to Digital Banks” on September 14.

It amended Circular No. 1105 or the “Basic Guidelines in Establishing Banks” issued last December 2020, which defined digital banks as a new bank category separate from existing bank categories where banking services are delivered over the internet.

The changes in the new rules now allow the central bank to consider applications to set up thrift, rural, and cooperative banks that have digital bank business models as digital bank license applications.

According to the circular, the abovementioned banks, which primarily offer financial products and services that are processed end-to-end through a digital platform or electronic channels under an Advanced Electronic Payments and Financial Services (EPFS) license, will be required to put up ₱1 billion as capital to be granted a digital bank license.

Also, existing thrift banks, rural banks, and cooperative banks that operate similar digital platforms or electronic channels under an EPFS license are given 5 years to meet the new minimum capital requirement for a digital bank license.

“These banks shall submit to the Bangko Sentral an acceptable capital build-up program within six months from the date of effectivity of this circular,” the BSP stated.

Despite the amendment, BSP Deputy Governor Chuchi G. Fonacier reminded that this does not mean that there will be digital bank licenses approved. Currently, the submission of applications from new digital banks is closed until Dec. 2024. (Read more: Bangko Sentral to Reopen Digital Bank Applications If Needed)

Moreover, the circular also included a January 2021 clarificatory memo on new bank applicants which previously explained that applicants that are proposing to operate business models that looked like digital banks will be approved as digital banks.

Fonacier clarified that the central bank may require all banks with digital banking services to apply for the appropriate digital bank license as per its transitory provision, noting that the banks granted with a digital banking license may represent themselves to the public as a digital bank.

The BSP completed distributing certificates of authority (COA), the third and final step to enabling these financial institutions to start full operations, last August. (Read more: BSP: All Six Digital Banks Now Allowed to Operate)

There are currently six licensed digital banks in the country: Overseas Filipino Bank of Land Bank of the Philippines; Tonik Bank of Singapore; UNObank of Singapore; GoTyme, of the Gokongwei Group and Singapore-based Tyme; UnionDigital of UnionBank; and Maya Bank, owned by PayMaya of PLDT Inc.

Recently, the central bank’s Monetary Board approved the Test and Learn Framework, or the Regulatory Sandbox, that will allow the BSP-regulated institutions and related firms to test and offer some innovative products in a controlled environment. If it succeeds, the sandbox may eventually be useful for the domestic financial system. (Read more: Bangko Sentral OKs Regulatory Sandbox for Banks)

This article is published on BitPinas: BSP Updates Regulations on Digital Banks

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