BSP caps Philippine digital banks at seven for next three years

The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) has decided to limit the number of digital banks in the Philippines to seven for the next three years, with the application window ending at the end of August.

In a virtual briefing on Thursday, BSP Governor Benjamin Diokno said the Monetary Board decided to cap the number of digital banks in a meeting last Thursday, August 12.

“Limiting the number of digital banks will allow the BSP to closely monitor the performance and impact of digital banks to the banking system, and their contribution to the financial inclusion agenda,” he told reporters.

“We need to ensure that there is healthy competition among banks, enabling them to offer innovative and competitive financial products and services,” he added.

The central bank approved the recognition of digital banks a new bank category separate and distinct from other bank classifications in November 2020.

Digital banks are defined as banks that offer financial products and services that are processed end-to-end through a digital platform and/or electronic channels with no physical branches.

To qualify, banks must meet the minimum capitalization of P1 billion, and will have to follow all the fiduciary rules imposed on other bank categories.

The Monetary Board has so far approved five digital banks. Three of these are new digital banks — UNObank, UnionDigital Bank, and GoTyme; and two are existing banks that converted into digital banks — Overseas Filipino Bank, and Tonik Bank.

There are also two applications currently being processed and if approved would meet the seven-bank limit, providing difficulties for banks just now considering to apply for a digital license.

“If you submit an application at this time, because we have made it clear that it’s on a first-come, first-served basis, your chances of getting in is very slim because that assumes that the two pending applications that are being processed will be disqualified or that they will not be able to comply with all the requirements,” Diokno said.

“If you are thinking of applying at this time, there are a lot of documentary requirements and you may not be able to do that in the next couple of days,” he added.

Moving forward, Diokno said the limit will be implemented for the next three years as the central bank establishes its regulatory powers over the digital banking sector.

“If there is a need for lifting the limit, we will do so, but if our judgment is seven is enough, then there will be no additional digital banks in the future because in other countries they have also limited the number of digital banks,” he explained.—LDF, GMA News