THE Bangko Sentral ng Pilipinas (BSP) is moving to limit how far rural banks can expand through digital channels, proposing a cap on customers located outside their physical areas of operation.
In a draft circular, the BSP said rural banks using online platforms to deliver services must ensure that customers with registered addresses outside their head offices and branch locations do not exceed 30 percent of total accounts.
“The policy proposal seeks to ensure that prudential standards remain proportionate to the evolving risk profile of rural banks as they transition toward more technology-enabled operations,” the central bank said.
“These requirements aim to foster digitalization while ensuring that rural banks continue to promote countryside development and serve the communities where they operate,” it added.
Under the draft rules, rural banks that breach the 30-percent limit on customers outside their physical areas of operation may face supervisory action.
The BSP said it may require these banks to comply with all regulatory requirements applicable to digital banks, including raising their minimum capital to P1 billion within one year and maintaining a supervisory assessment framework rating (SAFr) of at least “3.” These measures are intended to ensure that banks expanding digitally have sufficient buffers to manage the higher risks involved.
A SAFr rating of 3 means the bank is stable, handles risks well and has enough backup to handle most problems. Its board and management can deal with regulatory issues.
Under the updated Manual of Regulations for Banks, rural banks must have at least P50 million in capital for up to five branches, P120 million for six to 10 branches and P200 million for more than 10 branches.
Moreover, the proposed issuance clarifies that digital banks are allowed to establish physical, non-transactional touchpoints to support the delivery of their products and services, subject to approval by the appropriate BSP supervising department. These touchpoints are meant to assist customers without turning digital banks into branch-based institutions.
All rural banks will be given a one-year transitory period to comply with the new requirements once the circular takes effect.
If approved, the rules will become effective 15 days after publication in the Official Gazette or in a newspaper of general circulation.
