BSP tightens standards for tech-driven banks

February 12, 2026 | 12:00am

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is moving to tighten prudential oversight of technology-driven rural banks as more institutions adopt digital platforms, while seeking to ensure they remain anchored to their mandate of serving countryside communities.

In a draft circular, the central bank said rural banks are encouraged to harness technological advances to more effectively fulfill their mandate of serving countryside communities.

“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 BSP said.

Under the proposal, rural banks using online platforms will be required to observe a customer account threshold, with accounts of customers whose registered addresses are outside the bank’s physical areas of operations capped at 30 percent of total customer accounts.

The BSP said rural banks “shall continue to cater primarily to the communities where they operate,” underscoring that digital expansion should not dilute their core mandate.

The central bank also flagged enforcement measures for banks that breach the threshold. The BSP said it “reserves the right to deploy appropriate enforcement actions” against rural banks whose out-of-area customer accounts exceed 30 percent.

These measures may include requiring the bank to comply with all requirements applicable to a digital bank, including meeting a minimum capital of P1 billion within one year and maintaining a supervisory assessment framework rating of “3” or higher.

In assessing regulatory expectations, the BSP will also consider the complexity of a rural bank’s operations. The draft circular recognizes the “capability to offer fully digital onboarding” as an indicator of complexity that will be factored into the applicable prudential requirements.

The proposed issuance further clarifies the rules for digital banks, allowing them to establish physical, non-transactional touch points to support the delivery of products and services, subject to approval by the appropriate BSP-supervising department.

All rural banks will be given a one-year transitory period to comply with the new requirements once the circular takes effect. The BSP is accepting feedback on the draft circular until Feb. 25.

The proposed rules build on the BSP’s earlier push to steer thrift, rural and cooperative banks that are rapidly expanding their digital operations toward clearer regulatory pathways.

In a draft circular issued in July last year, the BSP laid out a framework that effectively nudged increasingly digital-centric banks either to apply for a digital banking license or to operate under progressively higher capital and compliance requirements as their digital footprint grows.

The BSP had said this approach was meant to foster innovation while preserving financial stability and a level playing field, signaling that banks choosing to remain under traditional licenses would face stricter prudential expectations as their digital activities expand.