The Bangko Sentral ng Pilipinas expressed support to a bill authored by House Ways and Means chair Joey Sarte Salceda which seeks to establish a separate regulatory and industry development regime for virtual-only banks in the country.
BSP Governor Benjamin E. Diokno said in a letter to Salceda dated Sept. 7 that the central bank welcomed House Bill 5913, or the Virtual Banking Act, saying that “the creation of a regulatory framework for digital banks promotes a level playing field by allowing new entrants to credibly compete with existing banks, as well as prevents regulatory arbitrage.”
“This will reinforce the provisions of the General Banking Law with respect to the proposal of the BSP which introduces digital banks as a new bank classification, distinct from the existing categories of banks, i.e., universal and commercial banks, thrift banks, rural banks, cooperative banks and Islamic banks,” Diokno said.
Under Salceda’s proposal, which also gained the support of the Cebu Bankers Club, virtual-only banks will be a separate classification of banks and will encourage virtual-only banks to pursue financial inclusion initiatives.
House Bill No. 5913 outlines the minimum macro-prudential standards for virtual-only banks and opens the virtual banking sector to some degree of foreign ownership to attract some of the financial technology know-how already developed in other countries and to ensure adequate capitalization of the industry.
“I thank Governor Diokno for the BSP’s support for our legislative initiative. We filed this on Jan. 6, anticipating the need for contactless payments due to COVID-19,” Salceda said.
“Just the day after we filed this bill, we received support from the Cebu Bankers Club for this proposal, and former colleagues in the industry have also expressed their appreciation for this proposal,” he said.
The lawmaker-economist said he was also considering legislative and regulatory measures to help the financial technology sector to set up and expand in the country.
He said his office was studying measures to further develop financial technology in the country and he would soon file a financial technology bill to modernize the payments system.
In its letter, the BSP assured that regulatory “sandboxes” were in place to help financial technology companies thrive.
Regulatory sandboxing is a practice of piloting a new sector or technology within a limited scope to protect the wider economy from the risks of the novel sector or technology, while also providing space for practical application and further development.