The Bangko Sentral ng Pilipinas (BSP) issued Circular No. 1240, Series of 2026, following Monetary Board Resolution No. 838 dated 3 September 2026. The Circular adopts prudential requirements applicable to technology-driven thrift, rural, and cooperative banks (TBs, RBs, and Coop Banks) to support prudent digital transformation while ensuring that bank operations remain strictly aligned with their respective mandates and business models.
The Circular amends Section 102 of the Manual of Regulations for Banks (MORB) regarding basic guidelines for establishing domestic banks and digital bank operations, as follows:
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Establishment of digital banks
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c. Physical touchpoints. Xxx
Digital banks may offer financial products and services through cash agents and other qualified service providers subject to the guidelines provided under Secs. 275 and 112, respectively.
Digital banks may establish physical, non-transactional touch points to support the delivery of their products and services: Provided, that the activities to be conducted within the said physical touch points are approved by the appropriate Bangko Sentral supervising department.
The application and documentary requirements for the establishment of digital banks are provided under Appendix 33.
Thrift, Rural and Cooperative Banks with technology-driven business model.
A. The amended Section 102 authorizes and requires the BSP to impose additional prudential requirements on TBs, RBs, and Coop Banks under specified circumstances involving technology-driven business models:
- First, when the BSP determines that a bank (TBs, RBs, and Coop Banks) is operating under a business model similar to that of a digital bank, or where supervisory concerns indicate that its risk management system and capital level are no longer commensurate with its business model and risk profile; and
- Second, when a bank (TBs, RBs, and Coop Banks) utilizes digital platforms to deliver services and demonstrates a significant increase in loan or deposit balances, defined as a quarterly growth rate in either loan or deposit balances of more than thirty percent (30%) for two (2) consecutive quarters.
When any of the foregoing conditions is present, the BSP shall impose additional prudential requirements, which may include, but are not limited to:
- Capital Requirements – requiring additional capital to meet the minimum capital requirement applicable to digital banks;
- Operational Restrictions – imposing restrictions on certain activities or on the marketing or introduction of new digital products and services;
- Enhanced Supervisory Reporting – requiring additional or heightened supervisory reporting;
- Risk Management and Control Systems – requiring the strengthening of risk management and control systems, including the adoption of automated anti-money laundering systems and real-time fraud monitoring and detection systems;
5. Other Measures – such other measures as the BSP may deem necessary to ensure that the bank’s risk management framework remains commensurate with the nature, scale, complexity, and risk profile of its operations.
B. Acquisition, Transformation, and Digital Bank Licensing
Transformation: In cases where a proposed acquisition of a TB, RB, or Coop Bank is intended to transform the institution into a technology-driven business model, the BSP shall require full compliance with prudential standards applicable to digital banks, including the ₱1.0 billion minimum capital requirement.
Digital Bank Licensing: The BSP may issue additional digital bank licenses, including through the conversion of existing TBs, RBs, and Coop Banks. In licensing evaluations, the BSP will consider the proposed business model, governance framework, risk management and control systems, financial and operational capacity, technological capabilities, and strategic value proposition, among other factors.
Transitory Provision and Effectivity
Transitory Provision: Existing TBs, RBs, and Coop Banks determined by the BSP to be operating under a business model similar to a digital bank must comply with applicable digital bank prudential requirements—including the ₱1.0 billion minimum capital requirement—within six (6) months from receipt of the BSP’s notice.
Effectivity: The BSP Circular No. 1240 shall take effect fifteen (15) calendar days following its publication in the Official Gazette or in any newspaper of general circulation.
This guide provides a general overview of the above transactions at the time of writing only and is not intended to be a comprehensive legal advice. This should also not be taken as an opinion on the topic. For more details and information, you may coordinate with any GEL Legal Partner regarding the matter.
Atty. Mary Grace L. Villanueva is an Associate at GEL Legal.