THE BANGKO SENTRAL ng Pilipinas (BSP) and the Bankers Association of the Philippines (BAP) will continue to foster digital transformation in the sector to meet demand for online financial services.

“Our policy agenda on digitalization will not only make the financial system more inclusive but also more efficient,” BSP Governor Felipe M. Medalla said in recorded opening remarks at the Asian Banker’s 2022 Finance Conference on Thursday.

“As you may know, we have welcomed the entry of digital banks into the system. These are new industry players that would further push the digital transformation of finance,” Mr. Medalla said.

The central bank has capped the number of digital banking licenses at six to monitor the development of the sector, ensure competition, and boost its capacity to regulate these kinds of lenders.

The six online lenders that secured licenses to operate in the country are Tonik Digital Bank, Inc.; GOtyme of the Gokongwei Group and Singapore-based Tyme; Maya Bank of Voyager Innovations, Inc.; Overseas Filipino Bank, subsidiary of Land Bank of the Philippines; UNObank of DigibankASIA Pte. Ltd.; and UnionDigital of UnionBank of the Philippines, Inc.

“To ensure that these banks safely operate, the BSP is about to issue the second set of rules that will clarify the prudential requirements applicable to digital banks,” Mr. Medalla said.

“A digital financial marketplace model is being developed, which will set forth, among others, the criteria for the grant of authority to engage in digital marketplace operations and the related supervisory expectations. The model builds on the open finance framework,” he added.

Earlier this week, the central bank said as part of the prudential requirements for digital banks, their reserve requirement ratio will be at 8% and they will likewise be covered by existing Basel III standards for big banks that mandate them to maintain adequate capital and liquidity buffers.

“Regulating banks amid accelerated digital transformation and post-pandemic recovery is very tricky. But with our three pillars guiding our actions, we are ready to face the challenge,” the BSP chief said.

“Rest assured that the BSP will continue to foster an enabling environment that allows the financial institutions under our supervision to contribute to our three pillars of price stability, financial stability, and safe, secure, and efficient payments and settlements system, while supporting economic growth,” Mr. Medalla added.

BAP President and East West Banking Corp. Chief Executive Officer Antonio C. Moncupa, Jr. said in a speech that financial institutions are undergoing “profound changes” towards digitalization.

“New players are coming in and introducing innovation and challenging the banks,” he said, adding that customers now expect better banking experiences.

Mr. Moncupa said government policy initiatives will also continue to usher banks towards digital transformation.

“With all these developments, digital adoption will only accelerate. While there are new players, perhaps more innovative and more agile, I see them more like a bridge than a threat to the banks,” he said.

“On behalf of the BAP member banks, we consider the digital push as good and positive. In the end, digital transformation will make financial transactions more efficient, take out some barriers, expand possibilities, and improve commerce,” he added. — K.B. Ta-asan