The Bangko Sentral ng Pilipinas (BSP) has approved the recognition of digital banks, creating a new category for them that is separate and distinct from existing bank classifications.

In a statement on Thursday, the central bank said its Monetary Board approved the Digital Banking Framework and expects digital banking applicants to have sound digital governance, robust, secure and resilient technology infrastructure, and effective data management strategy and practices.

“Digital bank is defined as a bank that offers financial products and services that are processed end-to-end through a digital platform and/or electronic channels with no physical branches,” it said.

However, the Monetary Board also recognized that digital banks are exposed to the same financial risks faced by conventional banks, but with elevated exposure to cybersecurity and money laundering risks.

“As such, digital banks would be subject to the same prudential requirements applicable to other types of banks with recalibration to be commensurate to their business model and risk profile,” it said.

And while digital banks largely operate in the digital sphere, they should also maintain a principal place of business in the Philippines to house their offices for management and other support operations. Also, their offices should serve as the main hub for customer concerns and point of interaction for regulators, including the BSP.

However, the BSP through the Monetary Board may limit the number of digital banks in the country.

Also, digital banks, in a draft regulation released in July, will have a capital requirement of at least P400 million to operate locally. More advanced types of digital banks are required to have a minimum capital of P900 million. CURRENTPH