BSP liberalizes bank licensing regulations
BSP liberalizes bank licensing regulations


The enhanced regulations align its screening of banks with international standards and comes on the heels of the lifting of the ban on new domestic banks

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) approved new regulations for granting licenses to banks and other financial institutions, after years of restrictions.

“The (BSP) Monetary Board approved the enhanced Supervisory Policy on Granting of a License/Authority (Licensing Policy) to strengthen and align its screening function with international standards and provide more consistency in how the risk-focused supervision is applied to the licensing process,” the BSP said in a statement on Friday, February 24.

The enhanced Licensing Policy sets the BSP’s criteria for granting licenses or authority to BSP-Supervised Financial Institutions (BSFI), as well as the right to reject applications that do not meet the criteria and to take action against BSFIs that no longer meet its standards.

To be eligible, BSFIs need to have a CAMELS rating of at least “3.” CAMELS is an international rating system that bank supervisory authorities use to rate a financial institution’s overall condition.

Banks are rated from 1 to 5 on capital adequacy, assets, management capability, earnings, liquidity, and sensitivity, with 5 being the highest score.

BSFIs must also have governance and independent control functions that meet what is considered appropriate given the BSFI’s size, complexity of activities and risk profile, and compliance with the central bank’s directives.

The BSP added that the new Licensing Policy will also feature a 3-tier licensing system to facilitate ease of doing business and submission of applications.

In the Type A category are license applications where compliance with the prudential screening criteria is a precondition for the BSFI to be considered eligible.

In the Type B category are license applications that do not require compliance with prudential screening criteria, while in the Type C category are those that no longer require prior BSP approval but shall be subject to submission of reports or certification/notification that pre-qualification requirements are met.

Banking ban lifted

Earlier this month, the central bank announced it will be lifting a 17-year-old ban on licensing for new banks.

The BSP limited the establishment of new domestic banks and branches in 1999, allowing only banks in rural unbanked areas and institutions involved in microfinance. This was done in part to encourage existing banks to consolidate in the face of the Asian financial crisis.

The lifting of the ban will be done in two phases, over a two-year period.

Under the first phase, new licenses for commercial banks will be given through the upgrading of thrift banks. The restrictions on the establishment of new domestic banks will then be fully lifted starting January 1, 2018.

The lifting of the ban was cited by Washington DC-based economic think tank Heritage Foundation as one of the reasons behind the Philippines climbing up 12 places in its annual Economic Freedom Index. –

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