The Bangko Sentral ng Pilipinas (BSP) has backed a bill authored by House Ways and Means chair Joey Sarte Salceda seeking to establish a separate regulatory and industry development regime for virtual-only banks in the country.
In a letter to Salceda, dated September 7, BSP Governor Benjamin E. Diokno said the central bank welcomes House Bill 5913, dubbed as the Virtual Banking Act, saying that “the creation of a regulatory framework for digital banks promotes a level playing field by allowing new entrants to credibly compete with existing banks, as well as prevents regulatory arbitrage.”
“This will reinforce the provisions of the General Banking Law with respect to the proposal of the BSP which introduces digital banks as a new bank classification, distinct from the existing categories of banks, i.e., universal and commercial banks (U/KBs), thrift banks (TBs), rural banks (RBs), cooperative banks, and Islamic banks,” Diokno said.
Under Salceda’s proposal, which has also earlier gained the support of the Cebu Bankers Club, virtual-only banks will be a separate classification of banks, and will encourage virtual-only banks to pursue financial inclusion initiatives.
HB 5913 also outlines the minimum macro-prudential standards for virtual-only banks, and opens the virtual banking sector to some degree of foreign ownership to attract some of the financial technology (fintech) know-how already developed in other countries, and to ensure adequate capitalization of the industry.
“I thank Governor Diokno for the BSP’s support for our legislative initiative. We filed this on January 6, anticipating the need for contactless payments due to Covid-19,” he said.
“Just the day after we filed this bill, we received support from the Cebu Bankers Club for this proposal, and former colleagues in the industry have also expressed their appreciation for this proposal,” Salceda added.
The lawmaker-economist said he is also considering legislative and regulatory measures to help the financial technology sector to set up and expand in the country.
He said his office is studying measures to further develop financial technology in the country and he will soon file a Financial Technology bill to modernize the payments system in the country.
In its letter, the BSP has also assured that regulatory “sandboxes” are in place to help financial technology companies thrive. Regulatory sandboxing is a practice of piloting a new sector or technology within a limited scope to protect the wider economy from the risks of the novel sector or technology, while also providing it space for practical application and further development.