The Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas, said Wednesday it approved the second set of guidelines on digital banks following the release of a framework in December 2020.
The BSP said in a statement the approved guidelines set out the supervisory expectations on corporate and risk governance of digital banks and the applicable prudential regulations on capital, leverage, and liquidity.
It said 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.
It said that due to the 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.
The governance expectations, Basel III standards and prudential reporting requirements applicable to universal and commercial banks will also apply to digital banks.
“As the digital financial ecosystem in the Philippines takes shape, the Bangko Sentral ng Pilipinas 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,” BSP Governor Felipe Medalla said.
“The prudential requirements for digital banks will strengthen the resilience of this new bank category to better absorb financial shocks and promote financial stability,” Medalla said.
The new rules provide that the BSP may require existing thrift, rural and cooperative banks to maintain a minimum capital of P1 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 earlier authorized six digital banks to operate in the Philippines, including GoTyme Bank Corp., Maya Bank Inc., Overseas Filipino Bank Inc., Tonik Digital Bank Inc., UnionDigital Bank Inc., and UNObank, Inc.
Medalla said the leap forward towards a digital economy would usher in a technology-driven and inclusive financial ecosystem that is resilient and capable of promoting a customer-centric banking experience.