BSP Releases Amendments to the Manual of Regulations for Banks Applicable to Digital Banks

On 14 September 2022, the Bangko Sentral ng Pilipinas (“BSP”) released Circular No. 1154 or the “Prudential Requirements Applicable to Digital Banks, and Amendments to Relevant Provisions of the Manual of Regulations for Banks and Non-Bank Financial Institutions and Manual of Regulations on Foreign Exchange Transactions.” The Circular mainly amends certain sections of the Manual of Regulations for Banks (“MORB”). Below are some of the significant amendments to the MORB.

• The guidelines on conduct of business of digital banks found in Section 102 of the MORB was amended to provide that similar with other types of banks, a digital bank shall be subject to all prudential requirements set out by the BSP.

• The transitory provision found in Section 102, now provides that the three (3)-year capital build-up allowed to banks converting to digital banks shall not apply to committed capital infusion of new investors in the converting bank arising from acquisition, purchase/sale, transfer of the converting bank’s shares of stock or other similar arrangements. In these cases, the required minimum capital shall be infused before the issuance of the Certificate of Authority to Register with the Securities and Exchange Commission.

• An additional rule governing bank advertisements similarly found under Section 102, was added which provided that no bank advertisement shall mislead, misrepresent, give a false impression to the public, or withhold information that a reasonable consumer needs to know with respect to the banking category of a bank and the products and/or services the bank is authorized to offer.

• Section 121 on Minimum Required Capital contains an additional provision which states that thrift banks (“TBs”), rural banks (“RBs”), and cooperative banks (“Coop Banks”) that primarily offer financial products and services processed end-to-end through a digital platform and/or electronic channels under an Advanced Electronic Payments and Financial Services license, shall maintain a minimum capital of Php 1 billion. Meanwhile, existing TBs, RBs, and Coop Banks primarily offering the said services shall be given five (5) years from the date of effectivity of the Circular to meet the new minimum capital requirement.

• Under Section 132, the board of directors of a digital bank must have at least one (1) member that has a minimum of three (3) years of experience and technical knowledge in operating a business in the field of technology or e-commerce. Likewise, under Section 134 on officers, a digital bank must have at least one (1) senior management officer with the same qualifications.

• Amendment to item (g) of Section 371 on documentary requirements required of a bank applying for approval to invest in allied or non-allied undertakings, wherein in case the investee company is at the same time an applicant requesting for authority to establish a bank, items (e) – Articles of incorporation of the investee company, and item (f) – Corporate Secretary’s Certificate, shall not apply.

The following appendices were also amended:

1. Appendix to Section 102 – Basic Guidelines in Establishing Banks; and
2. Appendix to Section 103 – Application Requirements for the Entry of Foreign Banks.

For more information on all amendments, please refer to the full Circular here.