House of Representatives Ways and Means Committee chair Joey Salceda
MANILA – A lawmaker on Friday called for the passage of the proposed Virtual Banking Act to create a regulatory framework for digital banks that would promote a level playing field by allowing new entrants to credibly compete with existing banks.
House of Representatives Ways and Means Committee chair Joey Salceda made the call following the Bangko Sentral ng Pilipinas’ (BSP) imposition of a three-year moratorium on the grant of digital banking licenses starting next month to closely monitor the performance and impact of the new banking classification on the industry.
In his weekly virtual press conference, BSP Governor Benjamin Diokno said the central bank’s Monetary Board has decided to stop accepting applications for digital banking licenses for three years after limiting the number of new players to seven.
Salceda said the measure fits well with the decision to impose the moratorium, highlighting that it promotes financial inclusion through virtual banks and proposes to open the sector to foreign equity of up to 70 percent to provide support to this new industry in the country.
“Within the three-year freeze, we should look at how virtual banking can support our financial inclusion goals. Certainly, we can also look at the range of banking services that virtual banks can offer,” he said. “As these licensed virtual banks grow, we will need the kind of stability and compelling power that a statutory regulatory framework can do."
House Bill 5913 outlines the minimum macro-prudential standards for virtual-only banks and opens the virtual banking sector to some degree of foreign ownership to attract some of the financial technology know-how already developed in other countries and ensure adequate capitalization of the industry.
Salceda said the passage of the virtual banking law would be crucial to the development of the country’s financial technology sector, which he says would be a job creator post-pandemic.
“Virtual banks depend on strong fintech. If we can create a large base of virtual bank customers, we are also creating demand for a fintech sector, which is among the most interesting Philippine sectors today," he said.
He cited the 2020 Philippine Startup Survey by management advisory firm PWC showing that respondents have the strongest interest in investing in financial technology.
“Once the basic ground rules are set for virtual banking, we will see significant growth in financial technology. Investors do not like the kind of discretionary power that the BSP exercises in the lack of a guiding law. They are still spooked by China’s crackdowns on large tech companies, such as Alibaba and Tencent,” Salceda said.
He said passing a virtual banking law is “very crucial” for investor attraction and confidence.
“If your rules are more predictable because they are enshrined in the law, it assures investors and fintech developers alike that there will be no sudden rule changes midstream," he said. (PNA)
