BSP rolls out cloud support for rural banks

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is rolling out technical assistance that will help qualified rural banks migrate from legacy information technology (IT) systems to cloud-based core banking platforms, strengthening their resilience and competitiveness amid rapid digitalization.

In a memorandum, the central bank issued guidelines for the Rural Bank Strengthening Program (RBSP) Digitalization Technical Assistance, which will provide eligible rural banks with support for the implementation and multi-year subscription to a Software-as-a-Service (SaaS) core banking system.

The initiative forms part of the broader RBSP technical assistance program approved by the Monetary Board in January 2024, covering digitalization, financial advisory and capacity-building support for qualified rural banks.

The technical assistance would include support for “the acquisition and subscription to a SaaS CBS for a limited period to enable enhancements in the operational efficiency, operational resilience, business continuity, cybersecurity and regulatory compliance capabilities of rural banks,” the BSP said.

The program is also intended to help improve the long-term viability and competitiveness of rural banks as digital services become more deeply embedded in the financial system.

Qualified lenders will receive support covering system configuration, data migration, system integration, testing, user training and commissioning, as well as cloud infrastructure, technical support, system updates and maintenance services.

The program provides for an implementation period of up to six months, starting from the issuance of a deployment notice to the service provider. This will cover the deployment of the core banking system until it successfully goes live.

After implementation, recipient banks will be entitled to a fixed 36-month subscription period covering continued access to the platform, cloud infrastructure, security and compliance services, technical support, maintenance and system updates.

However, not all rural banks will automatically qualify for the assistance. Applicants must have submitted an application or letter of intent for certain RBSP tracks during the program’s availability period from Sept. 21, 2022 to Sept. 21, 2025.

These include merger or consolidation, acquisition or third-party investment, upgrade of banking license and the capital build-up program.

Banks must also be compliant with minimum capital requirements under BSP Circular 1151 based on their latest available financial reporting data and must not have an existing subscription to a cloud-based or SaaS core banking system at the time they apply.

The BSP will additionally assess an applicant’s overall risk profile, latest supervisory assessment, outsourcing risk management framework, IT readiness and operational capacity to ensure that the bank can prudently implement and sustain the new system.

Before applying, rural banks will also be required to conduct a self-assessment covering their readiness to adopt the technology, including personnel, processes, connectivity, IT infrastructure and their ability to sustain use of the system after the technical assistance period.

Since the adoption of a SaaS core banking platform constitutes a material IT outsourcing arrangement, applications will also be evaluated under existing BSP regulations on outsourcing, technology and related risk management.

The central bank will determine whether an application is complete within five banking days from receipt. Once complete, the BSP will have 25 banking days to evaluate the request.

Banks approved for the program will then enter into a technical assistance agreement with the BSP.