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BSP releases guidelines for establishment of digital banks

THE BANGKO SENTRAL ng Pilipinas (BSP) has released the guidelines for establishing digital banks in the country, giving it a distinct classification to boost the sector’s delivery of financial services to consumers.

BSP Circular No. 1105 signed by BSP Governor Benjamin E. Diokno on Dec. 2 defines a digital bank as an institution that offers financial products and services through digital and electronic channels without physical branches.

“A digital bank shall be subject to the prudential requirements set out by the BSP including corporate governance and risk management, particularly on information technology and cyber security, outsourcing, consumer protection and anti-money laundering (AML) and combating the financing of terrorism (CFT), as provided under existing regulations,” the circular said.

Digital banks will be another classification alongside universal, commercial, thrift, rural, cooperative and Islamic banks.

Based on the guidelines, digital banks will be allowed to grant loans, accept savings, time deposits and foreign currency deposits, invest in securities, issue e-money products and credit cards, sell micro-insurance products, and buy and sell foreign exchange currencies, among others.

“The Monetary Board may limit the total number of digital banks that may be established taking into account the total number of applications received and the assessment of the overall banking situation,” it said.

Interested firms need to put up a minimum capital of P1 billion to establish a digital bank in the Philippines.

Stocks of foreign individuals or non-bank entities, Filipino individuals or local non-bank parties, and family
groups is limited at 40% of the voting stocks.

The BSP will also allow brick and mortar banks to convert to digital lenders.

“Said banks shall comply with the applicable requirements for a digital bank and submit an acceptable plan which shall address how the transition to a digital bank shall be managed,” the BSP said.

Traditional banks that want to become online lenders will be given three years to meet the P1-billion minimum capital and to implement transitory actions such as closures of branches and branch lite units.

Upon receiving notice of approval of conversion, a six month period will be given to such lenders to phase out their activities not associated with a digital-only bank and submit amended Articles of Incorporation and By-Laws duly registered with the Securities and Exchange Commission.

“The authority to establish a bank shall be automatically revoked if the bank is not organized and opened for business within one year from receipt by the organizers of the notice of Monetary Board approval of the application,” the BSP said. — L.W.T. Noble

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