BSP tightens capital rules for banks going digital

The Bangko Sentral ng Pilipinas has imposed a PHP 1.0-billion minimum capital requirement and other prudential standards on thrift, rural, and cooperative banks whose operations are shifting toward digital-bank business models.

The rules seek to ensure that capital, governance, and risk controls keep pace as smaller banks expand rapidly through digital platforms, protecting depositors and the wider financial system from risks that may no longer match a bank’s formal business classification.

Under Circular No. 1240 dated Sept. 21, 2026, existing thrift banks, rural banks, and cooperative banks that the BSP determines are operating under a business model similar to that of a digital bank must meet the PHP 1.0-billion minimum capital requirement applicable to digital banks, among other requirements.

Affected banks will have six months from receipt of the BSP’s notice to comply with the prudential requirements.

The same PHP 1.0-billion minimum capital requirement will apply at the time of application when a proposed acquisition is intended to transform a thrift, rural, or cooperative bank into one operating under a technology-driven business model.

A bank undergoing such an acquisition must also comply with prudential standards applicable to digital banks.

The BSP may impose additional requirements depending on the risks posed by a bank’s operations.

These measures may include enhanced supervisory reporting, restrictions on certain activities or new digital products and services, and strengthened risk management and control systems.

The requirements will cover thrift, rural, and cooperative banks that meet two conditions identified by the central bank.

First, the banks must operate under a business model similar to that of a digital bank, or their risk management systems and capital must no longer be commensurate with their official business model and risk profile.

Second, the banks must use digital platforms to deliver services and record significant growth in loan or deposit balances.

The BSP said the requirements are intended to ensure that covered banks can adequately manage risks arising from the nature, scale, complexity, and risk profile of their operations.

The tighter standards address a regulatory concern that can emerge when a bank licensed under a traditional model expands through technology at a scale more closely resembling a digital bank, potentially increasing operational, cybersecurity, credit, liquidity, and other risks.

The circular also gives the BSP authority to issue additional digital bank licenses, including through the conversion of existing thrift, rural, and cooperative banks.

Any conversion will remain subject to the applicable BSP licensing framework for digital banks.

A digital banking license would allow a converting institution to market its digital services to a wider customer base, including customers outside the geographic area where it traditionally conducts business.

Conversion is not automatic, as the BSP will review an applicant’s readiness to operate as a digital bank.

The central bank will also assess the robustness of the institution’s governance and systems, its value proposition, business model, and resource capabilities.

The Philippines currently has seven licensed digital banks, according to BSP data updated as of Sept. 16, 2026, up from six in March.

The BSP reopened applications for new digital banking licenses on Jan. 1, 2025, after an earlier moratorium, and set a maximum of 10 digital banks allowed to operate in the country.

That licensing framework covers both new entrants and existing banks seeking to convert their licenses, while requiring applicants to demonstrate adequate capitalization, governance, resources, and viable business models.

The BSP has said the reopening of the market is intended to harness digital banking’s potential to expand financial inclusion and introduce new business models while ensuring that accompanying risks are properly managed.

Circular No. 1240 builds on that approach by applying digital-bank-level safeguards to thrift, rural, and cooperative banks whose actual operations and growth increasingly resemble those of fully licensed digital institutions.

The BSP said it continues to promote responsible innovation and prudent digital transformation while safeguarding the banking system.