Tech-savvy small banks to soon need more capital
The Bangko Sentral ng Pilipinas (BSP) will require higher capitalization from small banks with digital-centric operations—which may range between P200 million and P1 billion, depending on how mature their digitalization efforts are.
The BSP is collecting comments from stakeholders on a draft circular that proposes stricter prudential and capital requirements on thrift, rural and thrift banks with hybrid virtual-traditional banking models.
The regulator will wait for feedback until Aug. 12. The central bank said the draft rules were meant to ensure that regulatory standards remain aligned with the risk exposures of banks, while also fostering innovation and safeguarding the soundness of the banking system.
The BSP added that the new requirements “promotes a level playing field for both incumbents and new entrants as banks navigate the opportunities and challenges brought about by rapid digitalization in the banking sector.”
Under existing regulations, digital banks must meet a minimum capitalization of P1 billion and other prudential requirements.
Meanwhile, rural banks—some of which have operations that are highly digital-centric—are only required to maintain a minimum capital of P200 million at most, depending on the number of branches.
Thrift banks with head offices in Metro Manila and more than 50 branches are required to have at least P2 billion in capital. Those based outside Metro Manila need only P800 million for their 50 branches.
Tiers
The proposed regulations would classify tech-savvy small banks into three tiers, each reflecting an increasing level of digital integration.
Tier 1 will include rural and cooperative banks where at least 30 percent of deposit or loan customers are onboarded through digital channels. These banks must maintain a minimum capital of P200 million.
Tier 2 will consist of thrift, rural and cooperative banks with at least 50 percent of their deposit or loan customers acquired via digital platforms. These institutions will be required to maintain a minimum capital of P500 million for rural and cooperative banks and P600 million for thrift banks.
Tier 3 will cover banks with at least 75 percent of their deposit and loan clients onboarded digitally. These banks must maintain a minimum capital of P1 billion—the same requirement imposed on purely digital banks.
