MANILA, Philippines – The country’s chief banking regulator wants smaller financial institutions like thrift banks to embrace digital technologies to be able to more effectively deliver services to underbanked sectors of society in areas that are not reached by their larger rivals.
To this end, Bangko Sentral ng Pilipinas Governor Benjamin Diokno urged the Chamber of Thrift Banks — the umbrella organization of lenders specializing in mobilizing retail savings — adopt solutions that extend their reach beyond their traditional physical branch networks
“For thrift banks, this should mean two things,” he said during his online keynote address to the group’s annual convention. “First, shifting to the cloud must be seen as an opportunity, as even rural banks have maximized the benefits of scalability of financial services,
from mobile and electronic banking to near field communication payments.
“Second, thrift banks must embrace the change of mindset from a ‘brick and mortar’ thinking to embrace the promise of digital transformation in providing crucial banking services to its clients,” Diokno said.
The central bank chief explained that smaller thrift banks could take advantage of these available digital technologies to lower operational costs and better compete with large financial institutions.
“The opportunities are limitless, but risks, business synergies and contribution to growth have to be carefully considered,” he said. “The COVID-19 pandemic has also accelerated the digitalization of financial services to support resilience.”
To date, regulators have extended a slew of relief measures to the thrift banking sector, including relaxed requirements for accessing the central bank’s liquidity facilities.
Thrift banks can also stagger the booking of allowance for credit losses for loans extended to affected borrowers for a maximum period of five years, subject to the approval of the BSP.
Loan accounts affected by the pandemic may also be excluded from the past due and non-performing loan classifications until December 2021.
More importantly, the central bank has also incentivized lending by reducing the credit risk weights of loans granted to micro, small and medium enterprises currently in status to 50 percent from 75 percent for low-risk borrowers and 100 percent for higher risk ones.
Moreover, new peso-denominated loans to small businesses and certain large enterprises critically impacted by the pandemic shall be recognized as forms of alternative compliance with thrift banks’ reserve requirements against deposit liabilities and deposit substitutes.
As of end-July 2020, thrift banks provided a total of P80.0 billion loans to small firms. These were used as alternative compliance of thrift banks with the reserve requirements as of end-September 2020. [ac]