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BSP to limit number of digital banks

The Bangko Sentral ng Pilipinas (BSP) will set a limit to the number of online-only banks, which have lower capitalization requirement.

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno ( Bloomberg file photo)

BSP Governor Benjamin E. Diokno said many banks have expressed interests to put up digital banks pending approval of BSP’s digital banking regulation.
One proposed rule is to implement at least P1 billion capitalization to set up a digital bank, as compared to a minimum P2 billion for a traditional bank.

There are three banks that are already applying to deliver digitized financial services but these applications are not digital bank applications but are applying under existing BSP banking classification.

“Upon release of (digital bank) guidelines, we will start accepting applications for authority to establish digital banks but the BSP reserves the right to set a limit on the number of digital banks’ entrance considering the number of applications received as well as the developments and overall banking situation,” said Diokno on Thursday. The day before, the BSP released for comments the second circular draft on the establishment of digital banks.

“BSP is in the final stages of the policy formulation process. We hope to issue the policy before the end of the year,” he said.

In the meantime, Diokno said the BSP is entertaining queries from both local existing banks and foreign banks.

Exploratory talks have been held with quite a number of parties such as local banks and non-bank corporations, as well as foreign individuals and non-bank corporations that have signified interests on the establishment of digital banks.

Giving out a new classification of banking license as digital banks is part of the BSP’s three-year digital payments transformation roadmap to lay down a digital financial ecosystem that is supportive of financial inclusion, said Diokno.

The BSP is targeting to have 50 percent of retail payment transactions to shift to digital and 70 percent of adult Filipinos to have formal accounts by 2023.

“A key component of this roadmap is the proposed regulatory framework on digital banks. These banks can help advance financial inclusion by addressing long- standing demand and supply constraints to delivering financial services,” said Diokno.

The draft circular on the establishment of digital banks consider these banks as exposed to the same risks as other types of banks and they will be required to comply with the same corporate governance and risk management standards as with other bank categories, depending on their business model and risk profile.

The BSP is also revising guidelines on virtual currency exchanges (VCEs) and electronic money issuers (EMIs).

The ongoing review to the VCE and EMI framework was prompted by what Diokno said was the accelerated growth on the use of EMIs and VCEs and the proposed revisions will update the guidelines for virtual assets and virtual asset service providers.

He said the revisions will “enhance” existing regulation and supervision of money service business activities using technology of virtual currencies (VC) to be “in line with international standards for anti-money laundering and countering the financing of terrorism.”

Since the lockdown of Metro Manila and other major areas in the country – the longest COVID-19 restriction period at seven months now – Diokno said the BSP has noted continued increase in VC transactions which before the pandemic was averaging six million annually in terms of volume.

The latest number, as of end-June, was about 4.3 million. Value-wise, VC transactions amounted to P59 billion or $1.2 billion during the first half of 2020, about 3x more than the 2019 total value.
“This suggests the growing public acceptance of virtual currencies to facilitate payment, remittances, and other VC-related transactions,” said Diokno.

BSP preliminary data on EMIs, in the meantime, for the first quarter of 2020 put the e-money transactions volume at 133.5 million worth P391.3 billion.


Source: Manila Bulletin (https://mb.com.ph/2020/10/08/bsp-to-limit-number-of-digital-banks/?utm_source=rss&utm_medium=rss&utm_campaign=bsp-to-limit-number-of-digital-banks)

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