BSP moves to ease branch licensing rules for well-rated banks, tighten oversight of riskier lenders

To streamline administrative procedures governing how banks establish and relocate their branches, the Bangko Sentral ng Pilipinas (BSP) is seeking to overhaul branch licensing rules to align oversight…

To streamline administrative procedures governing how banks establish and relocate their branches, the Bangko Sentral ng Pilipinas (BSP) is seeking to overhaul branch licensing rules to align oversight with a bank’s supervisory standing rather than applying uniform administrative requirements. Monetary Board (MB) Chairman and BSP Governor Eli M. Remolona Jr. said in a draft circular that the central bank seeks to update rules on the establishment and relocation of branches or branch-lite units (BLUs) of domestic lenders.

Of the four proposed amendments, the BSP is notably pushing to align standards with supervisory assessment framework (SAFr) ratings and adopt a “more risk-based approach to supervisory approvals.” Under the forthcoming new guidelines, well-rated institutions classified under category 1 will benefit from streamlined notification processes and reduced fees, allowing them greater operational flexibility. BLUs of banks under category 1 can be established or converted into branches without prior approval and will not be subject to processing fees from the BSP.

Conversely, category 2 banks, or entities with greater supervisory concerns, will remain subject to stricter oversight and mandatory approvals. Additionally, branches for which the BSP has received notification will have only three years to open, with no extensions allowed. Banks will still undergo additional reviews when relocating head offices. However, branch and banking office transfers will only require notification to the BSP, removing the need for additional licenses, compliance certifications, and relocation fees. Client notification under board-approved policies will also replace the one-and-a-half-month advance notice requirement.

“Notification to depositors, creditors, and other affected clients under board-approved policies replaces the 45-calendar-day prior notice to depositors and creditors,” the draft circular read. Besides streamlining administrative procedures, the BSP also stressed that the revised framework is designed to provide clear regulatory incentives for sound governance, encouraging banks to maintain high standards of risk management and internal compliance. A large number of banks that maintain satisfactory supervisory ratings are expected to benefit from the proposed policy framework.

“The amendments are intended not only to simplify administrative requirements but also to provide regulatory incentives for banks to sustain sound governance, risk management, and compliance practices, while preserving the BSP’s ability to exercise closer scrutiny over institutions that present elevated supervisory concerns,” the draft circular read. Streamlining processes would allow the BSP to redirect critical oversight toward high-risk banks and institutions.