Manila:The Bangko Sentral ng Pilipinas (BSP) has issued a circular outlining capital requirements for banks transitioning to digital bank business models.

According to Philippines News Agency, Circular No. 1240 mandates that existing thrift banks, rural banks, and cooperative banks deemed by the BSP to operate similarly to digital banks must maintain a minimum capital of PHP1 billion. These banks are given six months from notice receipt to comply.

For banks planning to transition through acquisition into a technology-driven model, the PHP1-billion minimum capital requirement applies at the application stage. Compliance with prudential standards for digital banks is also necessary.

Additional requirements may be imposed by the BSP, such as enhanced supervisory reporting, activity restrictions, new product limitations, and improved risk management systems. These rules apply to banks operating like digital banks or those with risk systems and capital misaligned with their business model and risk profile, as well as those using digital platforms with significant growth in loans or deposits.

The BSP emphasizes that these measures ensure banks manage risks associated with their operations' nature, scale, complexity, and risk profile. The circular also permits the issuance of additional digital bank licenses, potentially converting existing banks, contingent on meeting licensing framework criteria.

A digital banking license enables banks to expand their services to a broader customer base beyond their usual geographic business areas. Conversion to a digital bank license will be carefully reviewed, considering factors such as operational readiness, governance, systems robustness, business model, and resource capabilities. Currently, seven digital banks hold licenses in the country.