BSP Streamlines Licensing Requirements

BSP Streamlines Licensing Requirements

The Monetary Board approved the revised guidelines streamlining the licensing requirements for BSP Supervised Financial Institutions (BSFIs) applying for special authorities.  This is in line with the thrust of the Bangko Sentral to apply the risk-based approach to the licensing process and promote ease of doing business. 

The guidelines classify licenses for special authorities into three (3) categories namely, Types A, B, and C licenses.  The requirements set out for each category are proportionate to the magnitude of risks that may arise from engaging in a specific activity and take into account the capability of the BSFI to manage the risks.   

Activities with Type A license that include establishment and sale of branches/branch-lite units (BLU), equity investment in allied and non-allied undertaking, trust and other fiduciary business, among others, are likely to expose the BSFI to increased risks.  In this regard, application for a Type A license requires compliance with three basic prudential criteria and prior BSP approval.  These prudential criteria are: (i) CAMELS rating of at least "3", (ii) governance and independent control functions that meet what is considered appropriate for the BSFI, and (iii) compliance with BSP directives.  These criteria are tied in with the Bangko Sentral's supervisory assessment and enforcement actions to promote good governance and effective risk management systems.     

Type B license does not require compliance with the prudential criteria but shall be subject to BSP approval. Examples of activities with Type B license are conversion to a lower bank category and amendment of Articles of Incorporation/By-Laws.  These activities are related to the primary banking license granted hence, the application will be evaluated regardless of the risk profile of the BSFI.   

Finally, activities with Type C license no longer require prior Bangko Sentral approval since these are largely part of business decisions made to manage operations.  The BSFI only needs to notify the BSP that it intends to engage in Type C activities, which include, among others, relocation of approved but unopened branches/branch lite unit (BLU), permanent closure and surrender of branch/BLU license and servicing of deposits outside bank premises. 

The issuance also provides standard documentary requirements and fee structure for all licensing applications.  In this respect, the Monetary Board decided to lift the special licensing fee for applications to establish branches/BLUs in cities previously considered as restricted areas. This is to encourage BSFIs to expand their branch network and consumer touch points and ultimately promote financial inclusion.   

The approved guidelines cover the first set of special authorities with streamlined licensing requirements.  The Bangko Sentral shall continue to align the requirements for other activities requiring special authorities with the new framework to promote efficiency and reduce business costs.