COMMENTS on the Draft Circular for “Prudential Requirements for Technology-Driven Rural Banks” – Competition Issues

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We submitted our formal comments to the Bangko Sentral ng Pilipinas (BSP), the Philippine Competition Commission (PCC), and the Anti-Red Tape Authority (ARTA), to sound the alarm on a draft TRISD circular that threatens to stifle the growth of technology-driven Rural Banks (RBs).

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The proposed rule introduces a 30% cap on customer accounts sourced outside an RB’s home province. If a bank is "too successful" at digital onboarding and crosses this threshold, it is forced to either throttle its own growth or jump to a PHP 1 Billion Digital Bank license. Now, even if a rural bank is willing and capable of obtaining a Digital Bank license, the application window for a new license is already closed and limited to ten (10) market players.

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This artificially creates a “geofence” around a technology that is inherently borderless. It is counterintuitive to the logic of the internet. And the BSP is strangely undermining its very own national strategy for financial inclusion.

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In light of these competition concerns, we respectfully recommend the BSP's TRISD to:

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1. SUSPEND THE FINALIZATION OF THE CIRCULAR pending the conduct of a formal Competitive Impact Assessment (in compliance with the National Competition Policy) and Regulatory Impact Assessment (in compliance with the Ease of Doing Business and Efficient Government Service Delivery Act);
2. CONFIRM the completion or PUBLISH the results of the Competitive Impact Assessment and Regulatory Impact Assessment, if the same have already been conducted; and
3. CONSULT and REFER the draft Circular to the PCC for an Advisory Opinion under Section 12(k) in relation to Section 12(r) of the PCA.