BSP Circular 1240 sets PHP 1 bn capital floor for digital-centric smaller banks
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Key points
- BSP Circular No. 1240, dated 21 September, tightens rules on thrift, rural and cooperative banks operating digital-style models.
- Covered banks must meet the digital-bank minimum capital of PHP 1 bn within six months of BSP notice.
- The circular also opens a path for existing banks to convert to a digital bank licence.
Implications for lenders
Companies that lend through a partner rural, thrift or cooperative bank in the Philippines should check whether the partner falls under Circular 1240, since a covered bank must meet a PHP 1 bn capital floor within six months of BSP notice and may face limits on new digital products. A partner that cannot meet that bar may have to slow loan growth or pause products, so funding and origination plans need a second partner or another licence route. For a company buying a small bank to start lending, the capital floor and possible enhanced reporting now belong in the business case from the start.
Implications
Facts
Circular: in Circular No. 1240 dated 21 September 2026, BSP tightened rules for thrift, rural and cooperative banks that operate business models similar to digital banks or whose lending and deposits have grown substantially through digital channels. Source: Inquirer (reported 24 September).
Requirements: minimum capital of PHP 1 bn, the same as for digital banks, to be met within six months of receiving BSP notice. BSP may impose enhanced reporting, restrictions on certain activities or new digital products, and stronger risk management and internal controls. Same source. 1
Conversion: the circular allows existing thrift, rural and cooperative banks to convert to digital banks under the licensing framework. Same source.
Analysis
The model of acquiring a small licence such as a rural bank and scaling rapidly through an app now faces capital and governance limits. In Malaysia, licensing of BNPL and other providers under the Consumer Credit Act 2025 began in June 2026, so regulators across the region are closing gaps in the perimeter of digital lending.
Counterpoints and uncertainties
The industry is concerned that tighter rules will hinder innovation. Conversely, the conversion path gives operators able to meet the requirements a route to national scale. Coverage criteria, such as growth thresholds, will determine which banks are affected.
Key figures
- Minimum capital for digital-centric thrift, rural and cooperative banks: PHP 1 bn. Minimum capital under BSP Circular No. 1240, equal to the digital bank requirement, to be met within six months of BSP notice. Covered thrift, rural and cooperative banks. Basis date: 21 Sep 2026. Source: Inquirer: BSP tightens rules on digital-centric banks (2026-09-24)
Sources
SEA Lending Brief
A weekly summary of lending, credit and regulation across Southeast Asia.
Reports are for information only and are not investment advice.
A Japanese version of this article is available: 日本語版