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    BSP Updates Address Regulatory and Suptech Issues for Banks

    May 04, 2022

    The Central Bank of Philippines (BSP) issued guidelines for submission of the Supplemental Capital Adequacy Ratio (CAR) report, established the Shariah Supervisory Board to develop oversight framework on Islamic banking, and issued updates on the suptech initiatives involving artificial intelligence and wholesale central bank digital currency (CBDC).

    Below are the key highlights of these recent updates:

    • BSP issued guidelines for submission of the supplemental Capital Adequacy Ratio (CAR) report on the temporary regulatory relief on the capital treatment of provisioning requirements under the Philippine Financial Reporting Standard (PFRS) 9. All BSP-supervised financial institutions shall submit the supplemental CAR Report, Data Entry Templates (DET) and its corresponding Control Prooflist (CP), within 15 days after the end of reference quarter for solo basis and 30 banking days after the end of reference quarter for consolidated basis.
    • BSP signed the Memorandum of Agreement (MOA) establishing the Shari’ah Supervisory Board in the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM). The MOA will establish essential Shari’ah-compliance oversight framework on Islamic banking and finance matters, in line with the broader efforts to promote Islamic finance in the country. It serves as a comprehensive document detailing the responsibilities of the Shari’ah Supervisory Board, whose primary function is to issue Shari’ah opinions on Islamic banking products and services. The Shari’ah Supervisory Board will play a key role in driving the business model of Islamic banking institutions and the sustainability of Islamic banking products or services.
    • BSP is exploring applications of machine learning techniques in the areas of natural language processing, nowcasting, and banking supervision. BSP will use natural language processing to convert text into data to produce a quantitative summary, such as the news sentiment index and economic policy uncertainty index. In banking supervision, BSP aims to utilize machine learning techniques to enhance its data validation processes and better identify atypical data. The BSP Governor notes that the adoption of machine learning models would necessitate investments in information technology infrastructure and capacity building as well as a change in the organizational mindset.
    • BSP has decided to pursue the pilot project for a wholesale CBDC and is exploring the potential use of wholesale CBDCs in areas where these can yield the greatest value-adding benefits to the payment system. Dubbed Project CBDCPh, the pilot will test the use of CBDCs for large-value financial transactions on a 24/7 basis across a limited number of financial institutions. Learnings from the pilot will be critical in constructing the medium- to long-term roadmap for more advanced wholesale CBDC projects. Project CBDCPH is led by an intersectoral project management team to ensure coverage of critical operational areas; these include policy and regulatory considerations, technological infrastructure, governance and organizational requirements, legal matters, payment and settlement models, reconciliation procedures, and risk management. In contrast to the general purpose or retail CBDC intended for use of the general public, a wholesale CBDC is restricted mainly to banks and other financial institutions.

     

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    Keywords: Asia Pacific, Philippines, Banking, Shariah Supervisory Board, CBDC, Central Bank Digital Currency, PFRS 9, Regulatory Capital, Basel, Islamic Banking, Reporting, Regtech, Suptech, IFRS 9, BSP

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