The Regulator delivers a Blueprint for the Thrift Bank future – what can Thrift Banks learn from other financial institutions?
For more than 7 years, BSP has been helping Thrift Banks and Rural Banks during the process of going digital and assisting them in tough times. Based on the gathered experience and initiatives taken during that period, as part of the latest Thrift Bank Convention in October the Governor has delivered a highly interesting keynote speech – which in fact presents a proper blueprint for securing the future of the Thrift Banks. Basically, outlining the most important steps the Thrift Banks should take and the positive effects that they bring. The Governor’s speech itself covered quite a few crucial topics, namely:
- Relaxed regulatory measures
- Immediate opportunities with digital onboarding and acquisition
- Ways to lower the operational costs and scale
- New services like FX and remittance
- Thrift Banks lagging in cloud adoption
- Clear opportunities presented by the cloud
- Numbers behind the digital transaction explosion
- Plan for the future
and many other interesting ones. In this analysis, we will try to provide a short context behind each of the topics touched upon.
Having the bird’s eye view of the entire market, having as well closely followed the digitalization process of the pioneering banks, gives the BSP opinions and guidance substantial weight. Us at Oradian were thrilled because of two key things:
- Oradian is officially recognized again as the first approved cloud CBS technology provider, that powers the pioneering Cantilan Bank
- that our position completely coincides with the proposed strategy of the BSP – which has not happened by chance, rather as a result of years of close cooperation with visionary banks and early BSP efforts.
What were the immediate remedies that BSP introduced to help the Thrift banks during the Pandemic? It started with the regulatory relaxation:
- Incentivized Lending during the Pandemic – reduced credit risk weights of loans granted to MSMEs
- Reserve requirements lowering
- Substitutes for deposits – loans to MSMEs, and critically impacted large enterprises
recognized as forms of alternative compliance with thrift banks’ reserve requirements
- penalties for reserve deficiencies are being postponed and limited
- minimum liquidity ratio for Thrift Banks, COOPs and Rural Banks is reduced in 2020 to 16%
- new revised capital adequacy framework is being delayed for 1 year, until January 2023.
All of this the above helped Thrift banks to provide P80.0 billion loans to MSMEs.
But regulatory framework is not everything, it is there to set the playing field of the financial market and define the safety nets. There are other, more nuanced helping hands offered, that the smart banks recognized as an opportunity to grow, even in the time of the Pandemic.