The Bangko Sentral ng Pilipinas (BSP) is tightening capital and prudential requirements for thrift, rural and cooperative banks that are shifting toward digital banking models, seeking to ensure that faster-growing lenders maintain adequate safeguards.
Under Circular No. 1240 dated Sept. 21, existing thrift, rural and cooperative banks that the BSP determines are operating under a business model similar to that of a digital bank will be required to meet the P1-billion minimum capital requirement for digital banks, among other prudential standards.
The banks will have six months from receipt of the BSP’s notice to comply.
The same P1-billion minimum capital requirement will apply when a proposed acquisition is intended to transform a thrift, rural or cooperative bank into a technology-driven business model. The bank must also meet the prudential standards applicable to digital banks.
The BSP may impose additional safeguards, including enhanced supervisory reporting, restrictions on certain activities or new digital products and services, and stronger risk-management and internal-control systems.
The rules will apply to banks that meet either of two sets of conditions, according to the circular.
The first covers banks operating under a business model similar to that of a digital bank, as well as those whose capital and risk-management systems are no longer commensurate with their stated business model and risk profile.
The second covers banks that use digital platforms to deliver financial services while recording significant growth in their loan or deposit balances.
The new requirements were pushed through despite industry concerns that tighter rules could stifle innovation. The BSP said the updated rules are intended to ensure that these banks can adequately manage risks arising from the nature, scale, complexity and risk profile of their operations.
The circular also allows the BSP to issue additional digital bank licenses, including through the conversion of existing thrift, rural and cooperative banks, subject to the applicable licensing framework. A digital banking license would allow them to market their digital services to a broader customer base, including customers outside their usual geographic areas of operation. (Ian Nicolas P. Cigaral © Philippine Daily Inquirer)
