BSP Circular 1240 sets PHP 1 bn capital floor for digital-centric smaller banks

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.

Implications

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. The circular text was not reviewed, and the criteria for coverage (such as growth thresholds) are unverified.