BSP: digital banks must follow the same standards as their traditional counterparts



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Digital banks to be installed under the new central bank framework for a new category of financial institutions will be subject to the same level of prudential controls and risk mitigation measures as their established conventional counterparts.

This was said by the Bangko Sentral ng Pilipinas (BSP) after its Monetary Board approved the rules that establish the parameters of the policy destined to incorporate up to 70 percent of the country’s population to the formal banking system in three years.

“Applicants for digital banking are expected to have strong digital governance, a strong, secure and resilient technology infrastructure, and an effective data management strategy and practices,” the central bank said in a statement.

Despite not having the physical presence of a traditional branch network, digital banks are exposed to the same financial risks that conventional banks face with potentially elevated exposure to cybersecurity and money laundering risks, according to the BSP.

“As such, digital banks would be subject to the same prudential requirements that apply to other types of banks with a recalibration according to their business model and risk profile,” said the central bank.

Earlier this week, the Monetary Board approved the recognition of digital banks as a new banking category separate and distinct from existing bank classifications. Digital banks are those that offer financial products and services that are processed end-to-end through a digital platform or electronic channels without physical branches.

Under the new central bank framework, digital banks are expected to maintain a main place of business in the Philippines, despite the absence of branches, to house administration offices and other support operations and serve as the main hub for business. handling and point of customer concerns. contact points for interested parties, including BSP and other regulators.

Digital banks can also turn to cash agents and other qualified service providers subject to existing regulations to complement the innovative delivery of financial services.

The Monetary Board has the option to limit the number of digital banks that can be established. —DAXIM L. LUCAS

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