BSP: Digital banks must follow same standards as their traditional counterparts | Inquirer Business

BSP: Digital banks must follow same standards as their traditional counterparts

/ 04:20 AM November 28, 2020

Digital banks that will be put up under the central bank’s new framework for a new category of financial institutions will be subject to the same level of prudential controls and risk mitigation measures as their established conventional counterparts.

Thus said the Bangko Sentral ng Pilipinas (BSP) after its Monetary Board approved the rules that set the parameters for the policy aimed at bringing as many as 70 percent of the country’s population into the formal banking system in three years’ time.

“Digital banking applicants are expected to have sound digital governance, robust, secure and resilient technology infrastructure, and effective data management strategy and practices,” the central bank said in a statement.

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Despite not having the physical presence of a traditional branch network, digital banks are exposed to the same financial risks faced by conventional banks with potential elevated exposure to cybersecurity and money laundering risks, according to the BSP.

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“As such, digital banks would be subject to the same prudential requirements applicable to other types of banks with recalibration to be commensurate to their business model and risk profile,” the central bank said.

Earlier this week, the Monetary Board approved the recognition of digital banks as a new bank category that is separate and distinct from the existing bank classifications. Digital banks are those offering financial products and services that are processed end-to-end through a digital platform or electronic channels with no physical branches.

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Under the central bank’s new framework, digital banks are expected to maintain a principal place of business in the Philippines, despite the absence of branches, to house the offices of management and other support operations and serve as the main hub for customer concerns handling and point of contact for stakeholders, including the BSP and other regulators.

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Digital banks are also allowed to tap cash agents and other qualified service providers subject to existing regulations to complement the innovative delivery of financial services.

The Monetary Board has the option to limit the number of digital banks that may be established. —DAXIM L. LUCAS

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TAGS: Bangko Sentral ng Pilipinas, digital banks

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