BSP monitoring lenders behaving like digital banks

SOME LENDERS behaving like online banks might be required to obtain digital banking licenses to curb arbitrage and improve oversight, the Bangko Sentral ng Pilipinas (BSP) said.

“We’re busy right now determining which among the digi-centric institutions that we have right now can already be considered as operating like a digital bank,” BSP Director for Technology Risk and Innovation Supervision Department Melchor T. Plabasan told reporters on the sidelines of an event in Mactan, Cebu on Wednesday.

He said lenders operating like online banks might be obliged to also undergo the process of securing digital bank licenses.

“If the BSP has a basis for us to convert their license, then we will require them. That means all the requirements for digital banks will have to be complied with by these institutions,” he said.

In August, the Monetary Board lifted the moratorium on new digital banking licenses starting Jan. 1, 2025.

The BSP will now allow four more digital banks to operate in the country, which would bring the total to 10. These can either be new applicants or banks that will convert their existing license to a digital one.

Mr. Plabasan said the BSP could also convert the license of a rural or thrift bank into one for a digital bank.

“Because if you’re already behaving like a digital bank, you should be regulated like a digital bank, not a rural bank. That’s why the intention really is to minimize the arbitrage,” he added.

Once applicants secure approval from the central bank, they can begin operations as soon as their technology and infrastructure are ready, Mr. Plabasan said.

“Normally, the chartering is completed within three to four months, assuming that they have already submitted all the requirements,” he added.

BSP Governor Eli M. Remolona, Jr. earlier said these applicants must “bring something new to the table.”

Applicants will also undergo a “rigorous” licensing process that will evaluate their value proposition, business models and resource capabilities.

They must also comply with the standard licensing criteria, which cover capital adequacy and corporate governance and risk management, among others.

The BSP also said applicants must have the potential to reach untapped or underserved markets and push credit inclusion.

“We will not complete the four (licenses), just to say we granted all four licensees. If no one meets the additional requirements, then we will stay with the existing number,” Mr. Plabasan added.

So far, he said there has been equal interest from both new entrants and existing players seeking to convert their licenses.

“There are also foreign players that have signified interest to enter the Philippine market. We have already received some queries about certain legal requirements, regulatory requirements… By Jan. 1, probably we also will have done some assessment of the existing players there,” he said.

In 2021, the BSP capped the number of digital banking licenses at six to boost regulatory capacity and supervision of the sector.

The six digital lenders in the country are Tonik Digital Bank, Inc.; GoTyme Bank of the Gokongwei group and Singapore-based Tyme; Maya Bank of Voyager Innovations, Inc.; Overseas Filipino Bank, a subsidiary of Land Bank of the Philippines; UNObank of DigibankASIA Pte. Ltd.; and UnionDigital Bank of Union Bank of the Philippines, Inc.

The BSP defines a digital bank as a lender that offers financial products and services that are processed end-to-end through a digital platform or electronic channels with no physical branch. — Luisa Maria Jacinta C. Jocson