The Monetary Board approved the second set of guidelines for digital banks following the release of the digital bank framework in December 2020.
The approved guidelines set out the Bangko Sentral ng Pilipinas’ (BSP) supervisory expectations with regard to corporate and risk governance of digital banks as well as the applicable prudential regulations on capital, leverage, and liquidity. The guidelines also prescribe the prudential limits on equity investments in allied undertakings, required reserves against deposit and deposit substitute liabilities, and reporting requirements of digital banks.
Digital banks, unlike brick-and-mortar banks, have minimal or zero-reliance on physical touchpoints as their products and services are processed end-to-end through digital platforms or electronic channels. Due to its nationwide market reach resulting from the use of digital platforms or mobile applications in the banking services delivery, and ability to rapidly expand operations, this category of banks is considered as complex banks. Consistent with this, the governance expectations, Basel III standards, and prudential reporting requirements applicable to universal and commercial banks shall also apply to digital banks.
“As the digital financial ecosystem in the Philippines takes shape, the Bangko Sentral ng Pilipinas (BSP) remains committed to providing Filipinos with access to a range of innovative products and services supported by sound governance framework and secure and reliable digital infrastructure. The prudential requirements for digital banks will strengthen the resilience of this new bank category to better absorb financial shocks and promote financial stability,” Governor Felipe M. Medalla said.
The new rules provide that the BSP may require existing thrift, rural and cooperative banks to maintain a minimum capital of P1.0 billion if said banks primarily offer financial products and services that are processed end-to-end through a digital platform and/or electronic channels similar to digital banks. This is to ensure that banks maintain sufficient capital to cover the risks that they assume. It also provides a level playing field among banks that leverage on digital platforms in delivering their financial products and services. Banks concerned shall be given ample time to build up capital and meet the new minimum capital requirement.
The BSP has authorized a total of six (6) digital banks to operate in the Philippines, namely GoTyme Bank Corporation, Maya Bank, Inc., Overseas Filipino Bank, Inc., A Digital Bank of LANDBANK, Tonik Digital Bank, Inc., UnionDigital Bank, Inc., and UNObank, Inc.
“We are proud to take a leap forward towards a digital economy with the full operation of digital banks this year since this is seen to usher to a technology-driven and inclusive financial ecosystem that is resilient and capable of promoting a customer-centric banking experience,” the Governor added.