The Bangko Sentral ng Pilipinas (BSP) issued a circular regarding the institutionalization of the Regulatory Sandbox Framework. It aims to promote a more active, evidence-based, and results-driven assessment of new and emerging financial solutions.

It applies to all BSP-Supervised Financial Institutions (BSFIs), third-party service providers of BSFIs, other BSP-registered institutions, and new players that intend to offer or use emerging or new technology to deliver financial products/services pertaining to activities that could fall under the purview of the Bangko Sentral.

To participate in the regulatory sandbox, the applicants should meet the following criteria:

a.      The financial solution: uses new or emerging technology or utilizes an existing technology in an innovative manner and bridges a market gap in the delivery of financial products/services;

b.      Must demonstrate its capability to deploy the proposed solution through a roll-out plan or strategy;

c.      Shall provide an initial test plan, which includes test case scenarios and expected outcomes of the experiment;

d.   Must be able to identify significant risks, including money laundering and terrorist financing (ML/TF) risks, Information Technology (IT) and cybersecurity, data integrity and data privacy, market acceptability, consumer protection, and project implementation/execution, relevant to the innovation and the corresponding proposed safeguards and risk mitigation strategies;

e.      Must be able to identify Key Performance Indicators (KPls) or other metrics in monitoring the progress of the pilot implementation; and

f.       Shall provide an acceptable exit and transition strategy once the experimentation is completed regardless of the outcome.

To further promote this initiative, the BSP issued a memorandum to implement the provisions of the said circular requiring all regulatory sandbox applications, inquiries, and other correspondences to be electronically transmitted to the Sandbox Oversight Team (SOT) starting 15 January 2024 in the prescribed format.

Failure to comply with the prescribed manner and format will result in the failure of delivery of the applications, inquiries, and other correspondences to the SOT.

Authors:

Atty. Renuel Napiere

Atty. Graham Ragsac