THE Chamber of Thrift Banks (CTB) is supporting the Bangko Sentral ng Pilipinas’ (BSP) proposal to impose higher capital requirements for rural banks with expanded digital business models.
“We agree that the higher the risk, the higher the capital requirement should be,” CTB convention committee chairman Manuel Santiago Jr. told reporters on Wednesday.
“The level of transactions... should be backed by adequate capital; otherwise, your bank will not be healthy,” Santiago stressed.
Earlier this year the BSP issued a draft circular proposing a tiered regulatory framework for rural banks to strengthen oversight of the sector’s accelerating digital transformation.
BSP Deputy Governor Lyn Javier said the draft is undergoing review based on comments received, noting that it would have adequate safeguards and controls.
In the draft approved by the BSP Monetary Board, rural banks using online platforms must ensure customers with registered addresses outside their head offices and branches do not exceed 30 percent of total accounts.
The BSP may also require such banks to meet all regulatory requirements applicable to digital banks, including raising minimum capital to P1 billion within one year and maintaining a supervisory assessment rating of at least “3.”
These measures aim to ensure banks expanding digitally have sufficient buffers for the higher risks involved, the BSP said.
While the draft covers only rural banks, Javier said the BSP is looking at other industries and players it may cover.
“We will publish the issuance once we have settled the discussions on the comments that the BSP received," she said. “Rest assured we will continue to promote a level playing field.”
Santiago said the industry recognizes that greater digitalization also exposes banks to increased operational, cyber and technology risks, making stronger capitalization an appropriate safeguard. At the same time, he stressed that thrift banks’ business model remains distinct from that of digital banks.
Unlike digital banks, which operate online, thrift banks still rely on their physical branch networks as their principal delivery channel while using digital technology to improve customer service.
“The digital aspect is part of improving thrift banks’ level of service to customers," Santiago said.
