For the last few years, the Central Bank of the Philippines (BSP), has been helping thrift banks and rural banks go digital.
Securing the future of thrift banks, particularly during the pandemic, has been one of the BSP’s priorities. In 2020, the regulator’s governor made an interesting keynote speech at that year’s Thrift Bank Convention outlining the important steps they should take. The speech covered several crucial topics, including:
- 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
- Planning for the future.
The BSP has a bird’s eye view of the entire financial market, and has closely followed the digitalisation process of some of the industry’s pioneers. This is well known to Oradian, which was recognised as the first approved cloud-based core banking system provider when it partnered with Mindanao-based Cantilan Bank.
And, as a result of years of close cooperation with the likes of Cantilan Bank, Oradian’s position was already aligned with the BSP’s proposed strategy.
What did BSP’s strategy involve?
What were the immediate remedies that BSP introduced to help thrift banks during the pandemic?
It started with the regulatory relaxation:
- incentivising lending during the pandemic
- reducing credit risk weights of loans granted to micro, small and medium enterprises (MSMEs)
- lowering reserve requirements
- introducing substitutes for deposits
- recognising forms of alternative compliance with thrift banks’ reserve requirements
- postponing or limiting penalties for reserve deficiencies
- reducing the minimum liquidity ratio for thrift banks, co-ops and rural banks to 16%
- delaying the revised capital adequacy framework until January 2023.
This went into immediate action, and ultimately helped thrift banks provide P80 billion in loans to MSMEs.
But a regulatory framework is not everything – it is simply there to set the financial playing field and define the available safety nets. There are other helping hands on offer, and smart banks recognised these as an additional opportunity to grow, even when the pandemic really bit.
If you’re interested in discovering how Oradian’s cloud-based core banking system can unlock growth for your business, get in touch with one of our business intelligence experts for a free overview of the Oradian system.