PH reins in ‘backdoor’ digital banks with proposed cap. Who pays?

When the Philippines’ Rural Banks Act was passed in 1992, its aim was simple: encourage the establishment of small banks that could extend financing to far-flung areas where the main economic activity is agriculture.

Three decades later, some of these rural banks are reaching more than just farmers, as they are also serving the growing middle class.

When the Bangko Sentral ng Pilipinas (BSP) – the Philippines’ central bank – imposed a moratorium on the issuance of digital banking licenses in August 2021, a number of foreign investors found a loophole to enter the digibank market: acquiring rural banks.

Digital-centric rural bank Salmon Bank has a billboard along EDSA, one of the major thoroughfares in Metro Manila. / Photo credit: Salmon Bank

Sea Group-owned MariBank Philippines, for instance, holds a rural bank license, though its services are digital-centric. MariBank acquired Banco Laguna in December 2021, rebranded it the same month, and launched its local banking app in 2022.

It has a branch in Laguna, a province south of Manila, yet its customers come from all over the Philippines. Its total deposits as of September 2025 stood at 32.3 billion pesos (US$542 million), about 11% of the total deposits held by rural banks.

A number of fintech operators have followed MariBank’s playbook.

In February 2026, the BSP issued a draft circular imposing a 30% threshold for customers with addresses outside a rural bank’s physical area of operations. Those that meet higher capital requirements can go above that threshold.

If you’re already behaving like a digital bank, you should be regulated like a digital bank, not like a rural bank.

While the BSP has said the proposal was meant to ensure standards that are “proportionate to the evolving risk profile of rural banks as they transition toward more technology-enabled operations,” the move is widely seen as a bid to curb “backdoor” establishments of rural-turned-digital banks.

The BSP has been calling out digital-centric rural banks and hinting at plans to level the playing field since 2024.

“If you’re already behaving like a digital bank, you should be regulated like a digital bank, not like a rural bank. That’s why the intention really is to minimize the arbitrage,” BSP senior director Melchor Plabasan said at the time.

The current rules state that rural banks should have a minimum capital of 50 million pesos (US$840,000) if they have fewer than five branches. In contrast, digital banking licensees are subject to capital requirements of 1 billion pesos (US$16.7 million).

Under the proposed requirements, which are pending industry review and feedback, rural banks must meet a minimum capitalization of 1 billion pesos if more than 30% of their customer base is outside the physical operations of their head offices. The circular doesn’t specify the boundaries of where this jurisdiction extends to.

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