The Bangko Sentral ng Pilipinas (BSP) announced that it will begin accepting applications for additional digital bank licenses starting January 1, 2025, following the Monetary Board's decision to lift the moratorium on such licenses. This move will allow a maximum of ten digital banks to operate in the country.
The granting of new digital bank licenses, which includes the conversion of an existing bank's license to a digital bank license, aims to harness the potential of digital banks to positively impact the Philippine financial system while carefully managing the associated risks.
BSP Governor Eli M. Remolona, Jr. explained, "With this limit, the BSP can closely monitor developments in the digital banking industry, gain a broader perspective as these banks mature further in their operations, and assess the impact of new players on the banking system."
Since the issuance of the Digital Banking Framework in December 2020, six digital banks have been operating in the Philippines. With the current complement of digital banks, the lifting of the moratorium will allow for four additional licenses to be granted, either to new applicants or through the conversion of existing banks.
The new digital bank applicants will undergo a rigorous licensing process, which will evaluate their value propositions, business models, and resource capabilities. This process is in addition to the standard licensing criteria, which include assessments of the transparency of the bank's ownership and control structure, the suitability of shareholders, the fitness and propriety of directors and senior management, capital adequacy, and the strategic and operating plans of the bank. These plans must include a robust system of corporate governance and risk management.
Only digital bank applicants who meet the minimum criteria and demonstrate a unique value proposition or innovative business models that are not currently offered by existing players will be granted a license. Applicants must also show sufficient capabilities and readiness to deploy their digital solutions and sustainably grow their business within the Philippine setting.
"Applicants must bring something new to the table," the BSP Governor emphasized. "We want to see unique product and service offerings that differ from those of existing market players. These offerings should have significant potential to reach broader clientele, particularly the untapped or underserved market segments."
Governor Remolona also noted that the decision to lift the moratorium was based on the BSP's assessment of the operations of existing digital banks. The BSP considered the financial soundness of these banks and their achievement of the policy objectives outlined in the Digital Banking Framework. These objectives include promoting wider adoption and use of digital financial services in the country and expanding their reach into unserved and underserved segments of society.
Previously, the BSP capped the number of digital bank licenses at six and temporarily closed the application window effective August 31, 2021, to monitor the performance and impact of digital banks on the banking sector and evaluate their contribution to the BSP's digital transformation and financial inclusion goals.
The decision to allow new digital banks to operate in the country aligns with the BSP's mandate to ensure financial system stability, complemented by greater financial inclusion and digital transformation.
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