The Bangko Sentral ng Pilipinas (BSP) released on Friday the guidelines for financial institutions that wish to apply for a digital banking license in the country.
The guidelines are in the central bank’s Circular 1105, which BSP Governor Benjamin Diokno signed on Wednesday.
According to him, the Bangko Sentral’s policymaking Monetary Board approved on November 26 the inclusion of digital banks as a distinct classification of banks and the corresponding guidelines for their establishment.
“A new banking organization must have suitable/fit shareholders, including the ultimate beneficial owners; adequate financial strength; a legal structure in line with its operational structure; a board of directors; and senior management with sufficient expertise and integrity to operate the bank in a safe and sound manner,” Diokno said.
The authority to establish a bank shall be automatically revoked if the bank is not organized and opened for business within one year after organizers receive the notice of the Monetary Board’s approval of their application, he added.
This authority may be revoked if regulators determine that the organizers provided false or misleading information during the processing of the application.
Digital banks shall offer financial products and services that are processed end-to-end through a digital platform and/or electronic channels with no physical branch/subbranch or branch-lite unit offering financial products and services. They must have a minimum capitalization of P1 billion.
They are also subject to the prudential requirements set out by regulators. These include governance and risk management, particularly on information technology and cybersecurity; outsourcing; consumer protection; and anti-money laundering and combating the financing of terrorism, as provided under existing regulations.
They must maintain a principal/head office in the Philippines to serve as the main point of contact for stakeholders, including the BSP and other regulators.
“Digital banks may offer financial products and services through cash agents and other qualified service providers…” Diokno said.
These banks can grant loans, whether secured or unsecured; accept savings and time deposits, including basic deposit accounts; accept foreign currency deposits; invest in readily marketable bonds and other debt securities, commercial papers and accounts receivable, drafts, bills of exchange, acceptances or notes arising from commercial transactions; and act as correspondent for other financial institutions.
They can also act as a collection agent for nongovernment entities; issue electronic money products; issue credit cards; buy and sell foreign exchange; and present, market, sell and service microinsurance products.
Existing banks may apply for conversion to a digital bank, and shall be given three years from the approval of the Monetary Board to meet the minimum capital requirement and implement the transition plan, including divestment or closure of branches or branch lite units.
“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,” Diokno said.