BSP Set to Issue Digital Bank Licensing Regime

Source: Regulation Asia Editors, Regulation Asia 2020-07-08

Foreign individuals will be allowed to own up to 40% of a digital bank, while qualified foreign banks can own up to 100%.

The BSP (Bangko Sentral ng Pilipinas) has reportedly prepared new draft guidelines on the establishment of digital banks, to promote more efficient delivery of financial products and services to the unserved and underserved markets in the Philippines.

According to BSP Governor Benjamin Diokno, the new draft guidelines will seek to enable a regulatory environment that promotes responsible innovation, cyber resilience, and digitalisation of financial services – including digital banks as a distinct classification of banks.

The guidelines define a ‘digital bank’ as a financial institution that largely offers financial products and services through a digital platform or electronic channels with minimal reliance on physical touchpoints. Digital banks may not establish branches or branch-lite units except for a unit or office dedicated to receiving and addressing customer concerns.

Under the new licensing regime, a ‘basic digital bank’ should have a minimum capital requirement of PHP 400 million (USD 8 million), and may offer retail and MSME services such as deposits, unsecured loans, P2P payments, remittances, bills payments and electronic money.

An ‘advance digital bank’ should have a minimum capital requirement of PHP 900 million and can serve retail, MSME and corporate customers, offering basic bank services, secured loans and credit cards, in addition to other activities permitted by the BSP.

A digital bank may be subject to a higher minimum capital requirement and capital ratio based on the BSP’s assessment of its risk profile and market reach, Diokno said.

Under the draft guidelines, any foreign individual or non-bank corporation can own up to 40 percent of a digital bank, while qualified foreign banks can own up to 100 percent.

Banks incorporated in the Philippines that meet the definition of a digital bank will have a two year grace period to meet the minimum capitalisation requirement.

Currently, CIMB Bank, ING Bank and TONIK have digital banking operations in the Philippines – the latter being the first and only “pure-play” digital bank.

In January, a Philippine lawmaker introduced a bill offering a regulatory framework for digital banks, which proposed a PHP 20 billion minimum capital requirement, and just a six month transition period for existing digital banks.

Additional reporting from Philstar, Manila Times.

Bangko Sentral ng Pilipinas

digital banking

BSP Set to Issue Digital Bank Licensing Regime

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