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Philippines: Cap on digital banks to benefit existing players
FITCH Ratings said the decision of the Bangko Sentral ng Pilipinas (BSP) to stop accepting new applications for digital bank licenses is beneficial to existing institutions.
“Closing the door to new applicants helps to insulate conventional banks from more formidable competitors bearing these characteristics – at least until BSP’s moratorium on applicants is lifted,” it said in a Thursday commentary.
The cap, according to the credit rating agency, also provides banks more time to develop digital offerings that are at least as enticing as those of the entrants.
Furthermore, it was pointed out that the leading banks already have enormous client pools, adequate investment resources, and a tendency to be connected to their customers across numerous product relationships, which puts them in an excellent position to compete.
“We maintain that the major rated Philippine banks have well-entrenched banking franchises and adequate resources to adapt to the potentially disruptive entry of neobanks,” Fitch said.
Last week, the central bank announced that financial institutions that want to operate as a digital bank in the Philippines have only until the end of this month to apply for a license.
Its Monetary Board decided to close the window for new digital bank applications, including converting banks, on September 1 this year, in keeping with the overarching goal of maintaining a stable and competitive environment for banks.
Digital bank applications received until August 31 will be reviewed on a first-come, first-served basis, with completeness and sufficiency of documentation, as well as compliance with the licensing criteria. The BSP will process applicants who are able to provide all required papers on or before the deadline.
Applications with recognized documentary deficiencies will not be processed. The organizers will be notified that their applications are no longer being considered.
The BSP will no longer entertain or accept new or returned applications after Aug. 31, 2021.
Overseas Filipino Bank, Tonik Bank, UnoBank, Union Digital Bank and GoTyme have all received digital banking licenses from the Bangko Sentral so far.
The central bank’s implementation of a license cap is motivated by a regulatory philosophy of supporting innovation and financial inclusion without injecting damaging competition in the sector.
“Two of the five current licensees are bank-owned digital subsidiaries and we believe that while they may accelerate the groups’ digitalisation efforts, they do not materially intensify competition beyond that already posed by their parents,” it said.
Source: https://www.manilatimes.net/2021/08/27/business/top-business/cap-on-digital-banks-to-benefit-existing-players/1812511