BSP preparing new guidelines for smaller ‘digital-centric’ banks

THE BANGKO SENTRAL ng Pilipinas (BSP) is planning to issue a draft circular within the year to establish guidelines to assess the “digital centricity” of smaller banks.

“We just want to provide a level playing field because there are digital banks, and there are also digital-centric conventional banks. So, we need to level the playing field, that’s why we also would require some more capital from those doing the work. So, the guidelines will also be issued for that,” BSP Deputy Governor Chuchi G. Fonacier told reporters on Tuesday.

She added the draft circular could be released within the next few months.

The circular will set the regulatory requirements for thrift banks, rural banks, and cooperative banks to be in line with those of digital banks through a “phased” implementation, she said in a speech at the Chamber of Thrift Banks (CTB) Convention 2025.

Ms. Fonacier said the circular will “ensure proportionate application of prudential requirements applicable to a digital bank, as determined by the BSP.”

“It still is for consideration by the Monetary Board, so we’re still currently drafting,” Ms. Fonacier said.

CTB President and CARD SME Bank Vice Chairperson Mary Jane A. Perreras said the thrift banking industry still needs to beef up its financial position before its members are ready to increase their capital to the same level as digital banks.

“There is a difference between digital banks and thrift banks. Digital banks can go without the brick-and-mortar branches because they are digital. So, their cost is maybe much smaller than traditional banks,” she told reporters.

Ms. Perreras said she is hopeful the industry will be able to digitalize by next year.

The minimum capital requirement for digital banks is currently set at P1 billion.

For thrift banks, they need to have at least P1 billion in capital if their head office is in Metro Manila, P500 million for those in Cebu and Davao, and P250 million for those in other areas.

Rural banks need to have a capital of P50 million to P200 million depending on the number of branches, while cooperative banks need to have a capital of P10 million.

“We have to digitalize to be able to come up with better, innovative products for our customers,” Ms. Perreras said.

Asked if most of the industry is financially ready to go digital, she said: “They are preparing. But you can’t say that they are fully prepared.”

The BSP has been closely monitoring entities operating like a digital bank or those that have a digital-centric model, even approaching some players to apply for the appropriate license after the moratorium on digital banking licenses was lifted at the start of this year.

The central bank in January lifted a three-year moratorium on digital banking licenses, allowing four more players to operate in the country from the current six.

Meanwhile, Ms. Fonacier said the central bank is still planning to release the guidelines on the ethical use of artificial intelligence (AI) in the financial sector.

It was initially supposed to be released in the first half, but Ms. Fonacier said the central bank still needs to do more research on best practices.

“This will cover key areas such as ethical AI deployment, continuous improvement in AI’s accuracy when making financial decisions, and rigorous management of algorithmic bias,” she said. — Aaron Michael C. Sy