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Regulations on virtual-only banks needed amid contactless era

TDT

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VIRTUAL or online banks do not incur costs to open and operate a network of branches. (PHOTOGRAPH COURTESY OF SOVEREIGN GROUP)

Bangko Sentral ng Pilipinas fully supports the bill that seeks to establish a separate regulatory authority for virtual-only banks.

Governor Benjamin Diokno said the central bank welcomes House Bill (HB) 5913, or the Virtual Banking Act, as “the creation of a regulatory framework for digital banks promotes a level playing field by allowing new entrants to credibly compete with existing banks, as well as prevents regulatory arbitrage.”

“This will reinforce the provisions of the General Banking Law with respect to the proposal of the BSP which introduces digital banks as a new bank classification, distinct from the existing categories of banks, i.e., universal and commercial banks (U/KBs), thrift banks (TBs), rural banks (RBs), cooperative banks, and Islamic banks,” Diokno stated in a letter to the House of Representatives and bill author Albay Representative Joey Salceda.

Under the proposal, which also gained the support of the Cebu Bankers Club, virtual-only banks will be a separate classification of banks and will be encouraged to pursue financial inclusion initiatives.

HB 5913 also outlines the minimum macro-prudential standards for virtual-only banks, and opens the virtual banking sector to some degree of foreign ownership. It is expected to attract some of the financial technology know-hows of other countries and ensure adequate capital.

The bill may also incorporate measures to further develop financial technology to help modernize payment systems in the country.

The BSP assured regulatory “sandboxes” are in place to help financial technology companies thrive.

Regulatory sandboxing is a practice of piloting a new sector or technology within a limited scope to protect the wider economy from the risks of the novel sector.

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