Digital lenders now allowed to participate in the central bank’s monetary operations

THE BANGKO SENTRAL ng Pilipinas (BSP) is allowing digital banks to participate in its monetary operations.

Circular No. 1130 Series of 2021 signed by BSP Governor Benjamin E. Diokno included digital banks as eligible participants in the BSP’s reverse repurchase agreements and overnight lending and deposit facilities.

Digital banks will also be allowed to participate in the BSP’s auctions of term deposits and 28-day bills.

“[This is] just for uniformity because other [types of] banks are also allowed to do it,” BSP Deputy Governor Chuchi G. Fonacier said in a Viber message.

Under a reverse repurchase transaction, the BSP sells government securities with a commitment to buy them back at a later date.

Meanwhile, the overnight lending facility allows banks to secure liquidity from the BSP by presenting eligible collateral and its counterpart overnight deposit facility lets lender park their cash with the central bank.

Rates for the BSP’s reverse repurchase, lending, and deposit facilities are at record lows of 2%, 2.5%, and 1.5%, respectively. The central bank has kept benchmark rates steady since 2020 to support the economy’s recovery.

On the other hand, the term deposit facility and the BSP’s one-month bills are used to mop up excess liquidity in the system and guide market rates.

The BSP last year released a framework setting digital banks apart from other types of lenders. Digital banks are required to have a minimum capitalization of P1 billion and do not need to have physical branches as they are ex-pected to offer their products and services online.

The BSP has granted the six digital bank licenses. These were given to state-owned Overseas Filipino Bank, Tonik Digital Bank, Inc. (Philippines), UNObank, Aboitiz-led Union Digital Bank, GOTyme, a partnership between the Gokongwei Group and Singapore-headquartered Tyme, and Maya Bank of Voyager Innovations, Inc.

The BSP chief last month said they will stop issuing online banking licenses in the meantime to monitor these new players and ensure healthy competition among them. — L.W.T. Noble

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