Thu. Oct 29th, 2020

Regulation HK

Financial Regulator

BSP Revises Minimum Capital Requirement for Digital Banks

2 min read

The BSP will no longer consider a distinction between a basic and advance digital bank, according to a revised circular issued for industry review and feedback.

The BSP (Bangko Sentral ng Pilipinas) has issued a revised circular on the establishment of digital banks for review and comment by industry players, the Manila Bulletin reports.

Under the revised circular, the BSP proposes to require digital banks to have a minimum capitalisation of PHP 1 billion (USD 20.6 million), compared to PHP 2 billion required of traditional commercial banks.

Under an earlier proposal, the BSP was planning a PHP 400 million capital requirement for ‘basic’ digital banks and PHP 900 million for ‘advance’ digital banks – differentiating them by the services they can provide to customers.

The BSP now plans to no longer consider a distinction between a basic or advance digital bank.

The revised circular allows digital banks to grant secured and unsecured loans, accept savings and time deposits, open current and checking accounts, accept foreign currency deposits, invest in debt securities, act as a correspondent for other financial institutions, issue electronic money products and credit cards, buy and sell foreign exchange, and sell and service microinsurance products.

The revised circular includes a three-year transitory period for existing banks that wish to convert into a digital bank. The BSP will require such banks to submit a transition plan to be considered for such a conversion.

Foreign banks and non-bank corporations will be allowed to own up to 60 percent of the voting stock in a digital bank during formation; however, once reduced, they may not increase their stake beyond 40 percent thereafter.

The proposed application fee for a digital bank is PHP 250 million, compared to PHP 100  million for thrift banks, PHP 400 million for commercial banks and PHP 500 million for universal banks.

Digital banks will be expected to primarily conduct business using a digital platform and electronic channels, without branched or branch-lite units, though they may offer financial products and services through cash agents and other delivery partners, and will have to maintain a head office in the Philippines.

Digital banks will have to adhere to standards on information technology and cybersecurity, outsourcing, consumer protection, AML/CTF, data management, and digital governance.

The comment period on the revised circular will last until 12 October.

The BSP expects to issue the new policy year-end.

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