The country’s digital banking market is expected to increase in size with several foreign banks already sending feelers to apply for digital bank license with the Bangko Sentral ng Pilipinas (BSP).

BSP Governor Benjamin E. Diokno said Friday that they are receiving expression of interest (EOI) from a number of foreign banks abroad to establish a digital banking presence in the Philippines.

“We are awaiting submissions of complete documentation on their applications so that BSP can start the assessment process,” he said during his weekly “GBED Talks” online.

Diokno said at least one existing foreign bank here has applied to convert its current banking license to a digital bank license. “We are processing the application for conversion to a digital bank of an existing foreign bank operating in the country,” he said.

BSP Managing Director Lyn I. Javier said the EOIs came from foreign banks located in Europe and other Asian countries. “We are still evaluating other applications upon submission of complete documents,” she said.

There are 29 foreign banks with branching operations in the Philippines. Twelve of these foreign banks are global systemically important banks or GSIBs.

Javier said there will be more GSIBs that could set up shop in the country. “(The) Philippines offers a very attractive opportunity for growth and investment and we’re looking forward to having more GSIBs applying for a branching presence in the country, particularly with the issuance of the digital banking framework,” she said.

Diokno said most of the 29 foreign bank branches and subsidiaries here are Asian banks, from Taiwan and South Korea.

“The entry of foreign banks in the country has benefitted both the economy and the banking system in various ways,” he said, such as more foreign direct investments and industry competition that will lead to increased market penetration and efficient delivery of financial products and services.

As of end-April this year, the 29 foreign banks have total assets of P1.4 trillion which is seven percent of the total banking system assets. “This indicates more room for foreign bank branches and subsidiaries to expand their lending and investing activities,” said Diokno. Investment activities of foreign banks, he added, have significantly increased by P377.5 billion also as of end-April.

Since further opening the foreign banking sector in 2014 via Republic Act No. 10641, foreign banks’ assets have grown by 32 percent since 2014 and its loans went up by 23.4 percent. Deposits, in the meantime, increased by 43.4 percent.

As of end-March this year, foreign banks’ capital adequacy ratio stood at 27.5 percent which is well-above the BSP’s threshold and the international standard.

“The BSP recognizes the steady growth of foreign banks and their ability to contribute to the country’s road to recovery,” said Diokno, adding that foreign banks can help accelerate the banking sector’s digital transformation. “In fact, a number of new and incumbent foreign banks have expressed intent to establish a new digital bank or convert their existing license to a digital bank license,” he said.

Since 2014, with the new expanded foreign bank entry law, the BSP has approved 12 additional foreign banks under RA 10641. The last of these 12 applications were approved in 2019, before the pandemic happened.

Source: Manila Bulletin (