The Bangko Sentral ng Pilipinas ( BSP ), the Philippine central bank, has reopened applications for digital banks in the country. 

In a resolution signed by bank’s governor Eli Remolona on December 26 last year and made public before year-end, the BSP’s monetary board states that it is lifting the moratorium on the grant of new digital banking licences and the conversion of existing bank licences to digital ones, starting January 1, subject to prudential limits and conditions. 

“This [move] aims to continuously harness the potential of digital banks in bringing positive impact to the financial system through the introduction of new or emerging business models, while remaining sensitive to their attendant risks” the BSP notes, “and, at the same time, [it] levels the playing field between incumbent banks and new entrants.” 

In the Philippines, a digital bank is defined as a bank with no physical bank branches. There are currently six fully digital banks in the country, including GOTyme, Maya Bank, Overseas Filipino Bank ( OFBank ), Tonik Bank, UNObank and UnionDigital of the Union Bank of the Philippines.

The central bank has slowly been liberalizing policies related to digital banks in the country. In August 2024, when applications for digital banks were first reopened after a nearly three-month moratorium, the BSP said it would grant up to four new licences. 

However, in early December 2024, a senior official said that the central bank could grant more than four licences, provided that applicants provide a good value proposition. 

The BSP also said then that it would evaluate existing lenders, including rural banks in the country, that are engaging in “digital bank-like operations”.

In the resolution, the bank expanded the language on how many digital banks would be allowed in the country at any given time. 

“The monetary board shall determine the total number of digital banks that may be established in the country,” the resolution says, “taking into account the total number of applications received and the assessment of the overall banking situation.”

It also noted that any applications for the establishment of other types of banks that will primarily offer financial products and services that are processed end-to-end through a digital platform or through electronic channels “shall be treated and evaluated as a digital banking licence application”.

This is likely in response to the practice of businesses snapping up small rural lenders or thrift banks in order to secure a banking licence in the country, while offering only digital services, as a way to circumvent the limited number of digital banking licences available in the Philippines.  

“Existing banks that are assessed by the Bangko Sentral as having a highly digital-centric business model,” the BSP adds, “shall be required to comply with the requirements applicable to a digital bank, as may be determined by the Bangko Sentral.”

In the same circular, the BSP shares, existing banks that apply for conversion to a digital bank “shall comply with the applicable requirements for a digital bank, including the minimum capital requirement, and submit an acceptable plan which shall address how the transition to a digital bank shall be managed”.

Under these new rules, if approved, an existing brick and mortar bank wishing to transition into a digital bank will have three years from approval to implement the transition plan, “including divestment or closure of branches, sub-branches or branch-lite units”.