SOME SUPPLIERS that act like online banks may be required to obtain digital banking licenses to curb arbitrage and improve supervision, the Bangko Sentral ng Pilipinas (BSP) said.
“We are currently in the process of determining which of the digicentric institutions we have now can already be considered operating as a digital bank,” Melchor T. Plabasan, director of BSP’s Technology Risk and Innovation Supervision department, told reporters on the sidelines. from an event in Mactan, Cebu on Wednesday.
He said lenders operating as online banks may be required to also undergo the process of obtaining digital banking licenses.
“If the BSP has a basis to convert their license, then we will need them. This means that these institutions must meet all the requirements for digital banks,” he said.
In August, the Monetary Board lifted the moratorium on new digital banking licenses from January 1, 2025.
The BSP will now allow four more digital banks to operate in the country, which would bring the total to ten. These may be new applicants or banks that will convert their existing license into a digital license.
Mr Plabasan said the BSP could also convert a rural or thrift bank license into a digital bank license.
“Because if you already behave like a digital bank, you should be regulated as a digital bank, and not as a rural bank. “That’s why the idea is really to keep arbitrage to a minimum,” he added.
Once applicants receive central bank approval, they can begin operations once their technology and infrastructure are ready, Mr. Plabasan said.
“Normally, chartering is completed within three to four months, assuming they have already met all the requirements,” he added.
BSP Governor Eli M. Remolona Jr. previously 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 meet standard licensing criteria, which include capital adequacy, corporate governance and risk management.
The BSP also said applicants should have the potential to reach untapped or underserved markets and promote credit absorption.
“We will not complete the four (licenses), just to say that we have granted all four licensees. If no one meets the additional requirements, we will stick with the existing number,” Mr Plabasan added.
So far, he says, there has been equal interest from both newcomers and existing players looking to convert their licenses.
“There are also foreign players who have shown interest in entering the Philippine market. We have already received some questions about certain legal requirements, regulatory requirements… By January 1, we will probably also have done an assessment of the existing players there,” he said.
In 2021, the BSP limited the number of digital banking licenses to six to increase 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 by Voyager Innovations, Inc.; Overseas Filipino Bank, a subsidiary of Land Bank of the Philippines; UNObank from DigibankASIA Pte. Ltd.; and UnionDigital Bank or 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 without a physical branch. — Luisa Maria Jacinta C. Jocson