The Bangko Sentral ng Pilipinas (BSP) announced on August 8 that it will lift the moratorium on new digital banking licences beginning January 1, 2025. This decision, made by the BSP's Monetary Board, will permit the issuance of up to four additional digital banking licences, expanding the sector's reach in the Philippines, as reported by Manila Standard.

The move aims to harness the potential of digital banks to enhance the Philippine financial system while ensuring risk management. Since the introduction of the Digital Banking Framework in December 2020, six digital banks have commenced operations in the country. The forthcoming relaxation of the moratorium will allow for either the establishment of new digital banks or the conversion of existing bank licences into digital formats.

BSP Governor Eli Remolona Jr. explained that the limitation on new licences is intended to provide the BSP with the ability to monitor industry developments closely. "This approach will give us a broader perspective as these banks continue to evolve and allow us to assess the impact of new entrants on the banking system," Remolona said.

The application process for the new digital bank licences will be rigorous, focusing on the value propositions, business models, and resource capabilities of applicants. Prospective digital banks must meet several standard licensing requirements, including transparency of ownership, shareholder suitability, the fitness of directors and senior management, sufficient capital, and robust corporate governance and risk management frameworks.

The BSP will grant licences only to those applicants who offer unique value propositions or innovative business models. Candidates must demonstrate their ability to deploy effective digital solutions and sustainably grow their business in the Philippines. "We are looking for applicants who bring new and distinct offerings to the market, with significant potential to reach underserved or untapped market segments," Remolona added.

Previously, the BSP had capped the number of digital bank licences at six and temporarily halted the application process on August 31, 2021. This pause was implemented to evaluate the performance and impact of existing digital banks and their contribution to the BSP’s objectives of digital transformation and financial inclusion.

The decision to reopen the licensing process aligns with the BSP's mandate to ensure financial system stability, promote financial inclusion, and advance digital transformation within the country.