BSP issues rules on new service delivery channels for lenders

Posted on January 19, 2017

THE CENTRAL BANK has approved regulatory guidelines on new service delivery channels for banks and eased regulations on lenders’ deposit activities made outside banking premises, allowing banks more room to expand their footprint in the country.

In a statement on Wednesday, the Bangko Sentral ng Pilipinas (BSP) announced that its Monetary Board recently approved new regulations allowing banks to serve clients through cash agents. This move is expected to spur more “innovative digital solutions” for lenders to attract more clients, particularly those in the low-income and rural areas.

“Under the new regulations, banks are now allowed, with prior BSP authorization, to serve clients through cash agents contracted by banks to accept and disburse cash in its behalf, facilitating online self-service deposits, withdrawals and fund transfers, as well as bills payment,” the central bank said in a statement.

Under the regulations, cash agents can also perform “Know-Your-Customer” procedures and can be authorized to collect client documents for loan application and opening of new accounts.

Cash agents are also permitted to sell and service insurance policies to the bank’s clients, once authorized by the Insurance Commission.

“These cash agents are typically cash-rich third party entities with many outlets that conduct regular business in fixed locations anywhere in the country, such as convenience stores, pharmacies and other highly accessible retail outlets,” the BSP stated.

The central bank also highlighted that through its innovative delivery channel, “serving the currently unbanked and low-income segments can become more viable and sustainable for banks.”

Data from the BSP revealed 36% of all the country’s municipalities have no banking presence, with most being served by a variety of non-bank financial institutions such as pawnshops, cooperatives and lending investors.

The country’s banking sector expanded in the first semester of 2016 with a total branch network of 10,318. Of the total, 29 were cooperative lenders with 124 offices.

As of end-June 2016, there are 5,432 pawnshops operating in the country with a branch network of 10,805.

At the same time, the BSP also announced that the Monetary Board eased existing regulations on deposit-taking activities outside bank premises.

Under the amended regulations, local lenders now have more flexibility in coming up with “appropriate and cost-efficient ways” for their clients’ deposit pick-up and delivery services that will in turn, “enhance client experience.”

“To ensure the safety and soundness of banks as well as to uphold consumer protection, the guidelines emphasize banks’ responsibility for ensuring the adequacy of risk management and internal control systems for these liberalized deposit servicing activities,” the central bank stated.

The regulator also noted prior to giving their authorization to banks that will perform deposit services to their clients outside banking premises, BSP will have to evaluate the quality and sufficiency of the lender’s risk management and control systems. -- Janine Marie D. Soliman