Ms. Jan Celine C. Abaño-Ranada
Partner

Jan Celine C. Abaño-Ranada is a Partner at SyCipLaw and a member of the Firm’s Special Projects and Banking, Finance and Securities groups. Her areas of practice include project fi nancing, mergers, acquisitions, privatization, energy, and infrastructure.

She has extensive experience in project fi nance and other financing transactions in a range of industries, including energy, infrastructure, hotels, gaming and real estate development. She is also immersed in M&A work, and has led teams in projects in the banking, public utilities, manufacturing, and retail sectors.

Ms. Ranada has advised several banks that have extended financing to companies, including those engaged in the development of power plants and hotels and casinos. She has also participated in various capacities in mergers and acquisitions involving banking institutions, public utilities, manufacturing, communications, and retail companies.

She has been ranked as a “Next Generation Partner” in Banking and Finance by The Legal 500 since 2020.

Ms. Camille Angela M. Espeleta-Castillo
Senior Associate

Camille Angela M. Espeleta-Castillo is a Partner at SyCipLaw and a member of the Firm’s Special Projects, Banking, Finance and Securities, and Taxation groups. She is also a Certified Public Accountant.

Her practice areas include mergers and acquisitions, debt and capital markets, financial technology, public private partnerships, infrastructure, and energy and power.

Ms. Espeleta-Castillo regularly renders advice to clients from various regulated industries (e.g., financial technology, energy and power, lending and money services), particularly on regulatory compliance, corporate structuring and tax matters. She has extensive experience in high-value cross-border acquisitions and divestments, in addition to having acted as counsel to financial investors in private equity transactions and issuers and underwriters in capital markets transactions.

Mr. Ricardo Jesus E. Gutierrez
Senior Associate

Ricardo Jesus E. Gutierrez is a Partner at SyCipLaw and is a member of the Firm’s Special Projects, Banking, Finance, and Securities, and Intellectual Property groups. His practice areas include banking and fi nance regulations, project financing, structured finance, mergers and acquisitions, investments, projects and energy, technology, franchising and distribution, and arbitration.

He regularly advises banks and financial institutions for regulatory compliance. He likewise advises clients on the regulatory requirements applicable to derivatives and repurchase transactions.

Mr. Gutierrez also has extensive knowledge of financial technology regulations, such as those relating to online contracts, payments, and banking, and has advised a significant number of financial institutions in this area. Mr. Gutierrez is a Senior Lecturer in the University of the Philippines – College of Law, teaching Property Law and Private International Law. He is also a Teaching Fellow and an Associate Member of the Institute of Corporate Directors (ICD).

Recent Trends in Philippine Banking Laws and Regulations: Towards Financial Inclusion and Consumer Protection

Introduction

The Philippines is among the fastest-growing economies in Southeast Asia. However, large traditional banks have focused on wholesale and commercial products, leaving a vast potential retail customer base underserved. The banking penetration rate remains among the lowest in the region at just 56% in 2021. However, in recent years, the Philippine market has seen significant growth in the FinTech industry. An estimated 36% more Filipinos have bank accounts in 2024 as compared to in 2021 and the number of registered e-wallet accounts is expected to surpass 80 million before the end of 2025.¹The FinTech Times, A Step in The Right Direction: 36% More Filipinos Have Bank Accounts in 2024 Than in 2021, accessible via A Step in The Right Direction: 36% More Filipinos Have Bank Accounts in 2024 Than in 2021 | The Fintech Times; last accessed on February 20, 2025.

Recent legislation and regulations have generally focused on addressing this gap and harnessing the potential of online money services. In 2018, Congress passed the Personal Property Security Act (Republic Act No. 11057) (“PPSA”), allowing retail customers and micro, small, and medium enterprises least-cost access to credit. In May 2022, to protect financial consumer rights and grant financial regulators powers to protect such rights, the Financial Products and Services Consumer Protection Act (“FPSCPA”) was signed into law. In September 2022, in line with its policy of enabling responsible innovation to promote the development of an inclusive digital financial ecosystem, the Bangko Sentral ng Pilipinas (“BSP”), the Philippine central bank, issued BSP Circular No. 1153 and approved a Regulatory Sandbox Framework.

More recently, in December 2024, the BSP issued BSP Circular No. 1205 and Monetary Board (“MB”) Resolution No. 1400, lifting the moratoriums on applications for Digital Banks and Electronic Money Issuer-Non Bank Financial Institutions (“EMI-NBFI”), respectively.

THE NEW PPSA AND ITS REGULATIONS

One of the significant developments in Philippine legislation is the passing of the PPSA, amending or repealing certain laws, including the Civil Code provisions on the creation of pledges and the Chattel Mortgage Law regarding the creation of chattel mortgages and registration procedures for security interests over personal property, and the launching of the Personal Property Security Registry (“PPSR”).

The PPSA was enacted to strengthen the legal framework for secured transactions in the Philippines. It provides for the creation, perfection, determination of priority, establishment of a centralised notice registry, and enforcement of security interests in personal property (tangible and intangible), except aircraft and ships.

The PPSA took effect on 9 February 2019, with its full implementation conditioned upon the issuance of the relevant implementing rules and regulations and the establishment and operation of the PPSR (wherein notices of security interests may be registered). The implementing rules and regulations of the PPSA (“PPSA Rules”) were subsequently published and took effect on 3 December 2019.

On 3 February 2025, the LRA officially launched the PPSR as the centralized and nationwide electronic registry for the registration of notices of security interests and liens over personal property. The functions of the PPSR include the registration and search of all duly recorded notices, such as initial notices, amended notices, termination notices, and notices of auction sale.²Section 4, Functions of the PPSR and covered transactions, LRA Circular No. 02-2025, Operationalization of the Personal Property Security Registry (5 Feb. 2025). A notice becomes effective once it is discoverable in the PPSR records. The PPSR serves only an administrative function and does not determine the sufficiency, correctness, authenticity, or validity of any information contained in the notice. ³Section ³Section 11, Transitory Provisions, LRA Circular No. 02-2025, Operationalization of the Personal Property Security Registry (5 Feb. 2025)., Functions of the PPSR and covered transactions, LRA Circular No. 02-2025, Operationalization of the Personal Property Security Registry (5 Feb. 2025).[/mfn]

Regarding the security agreements previously registered with the LRA under the Chattel Mortgage Law during the transitional period from 3 February 2019 to 3 February 2025 (“Transitional Period”), the LRA clarified that security interests created and registered in the Chattel Mortgage Registry (“CMR”) during the Transitional Period may still be searched, amended, and canceled using the CMR. After the Transitional Period, the CMR4 will no longer accept new transactions covering security interests,⁴Section 10, Partial Cessation of the CMR, LRA Circular No. 02-2025, Operationalization of the Personal Property Security Registry (5 Feb. 2025). marking a complete transition to the new registration system. Further guidance on this transition was provided during the 16 January 2025 Technical Meeting on the PPSR, where the LRA confirmed that all active entries in the CMR will be consolidated into a single database for search purposes. However, as of this writing, this feature is not yet available in the PPSR, and a new LRA guideline addressing this matter in full is still pending release.

Creation of Security Interest

The PPSA introduced new rules governing the creation and registration of security interests over personal property in the Philippines. Under the PPSA Rules, parties are free to enter into any form of security arrangements over movable property as long as the security arrangement is not inconsistent with the PPSA or the PPSA Rules. Further, subject to existing law, parties may also apply the PPSA Rules to other functional equivalents of security interests, including fiduciary transfers of title; financial lease; assignment or transfer receivables; and sale with retention of title.

Under the PPSA, a security interest over personal property may be created by a ‘security agreement’, an operating lease for not less than one year, or the sale of an account receivable (unless otherwise stipulated by the parties in the document of sale). Except as otherwise provided in the PPSA, the PPSA Rules, or the agreement of the parties, a security interest will continue in the collateral notwithstanding its disposition. A security interest is extinguished when all secured obligations have been discharged and there are no outstanding commitments to extend the credit secured by the security interest.

A security agreement must be in writing and signed by the parties, identify the collateral and the secured obligation, and provide for the language to be used in the agreements and notices. A model security agreement is annexed to the PPSA Rules. There is no requirement under the PPSA that the security agreement be in a public instrument, but it is advisable given the practical effects of placing documents in a public instrument. In creating a security interest, it is sufficient that the collateral be reasonably identified. The security agreement may provide for the creation of a security interest in future property or after-acquired assets, but the security interest in that property will be created only when the grantor acquires rights in it or the power to encumber it. The security agreement may also provide that a security interest in a tangible asset that is transformed into a product extends to that product (but it shall be limited to the value of the encumbered asset before it became part of the product). It may likewise provide that a security Interest in a tangible asset extends to its replacement (but it shall be limited to the value of the encumbered asset before it was replaced).

Perfection of Security Interest

The PPSA provides that a security interest over personal property may be perfected to bind third parties through the following means: registration of a notice with the registry, actual or constructive possession of the tangible collateral by the secured creditor, or control of the investment property or deposit account.

The PPSA also sets out new rules for determining priority of security interests over the same collateral. Generally, priority is still determined by the time of perfection. However, there are specific rules that apply depending on the nature and kind of property involved.

Priority of Security Interests

The priority of security interests in the same collateral is generally determined by time of perfection. However, with respect to security interests over personal property, there are rules for determining priority for specific types of properties, such as a deposit account or investment property where the secured creditor is the deposit-taking institution, security certificates, electronic securities not held with an intermediary, electronic securities held with an intermediary, and negotiable documents.

Enforcement of Security Interest

With respect to enforcement, a secured creditor may enforce its security interest by: selling or disposing of the collateral, publicly or privately, or proposing to the debtor and grantor to take all or part of the collateral in total or partial satisfaction of the secured obligation, subject to certain notice and consent requirements. The debtor is also required to satisfy any deficiency. Under previous laws governing pledges, a secured creditor cannot recover any deficiency after a foreclosure sale.

THE FINANCIAL PRODUCTS AND SERVICES CONSUMER PROTECTION ACT

The FPSCPA, signed on 6 May 2022, aims to protect the rights of financial consumers. It gives financial regulators (like the BSP) powers for rulemaking, market conduct surveillance and examination, market monitoring, enforcement, consumer redress or complaints handling mechanism, adjudication, and other powers as provided by its enabling law. It also requires financial service providers to provide appropriate product design and delivery; ensure transparency, disclosure, and reasonable pricing; ensure fair and respectful treatment of clients; respect client privacy and protect client data; establish a financial consumer protection assistance mechanism; and adopt and implement information security standards.

The law renders void any provision of a contract for financial product or service if the provision deprives a client of a legal right to sue the financial service provider, receive information, have their complaints addressed and resolved, or have their non-public client data protected.

The FPSCPA provides for criminal and administrative sanctions for violations and declares as unlawful the commission of investment fraud.

REGULATORY SANDBOX FRAMEWORK

On 5 September 2022, the BSP issued BSP Circular No. 1153 and approved a Regulatory Sandbox Framework (the “Framework”), which aims to promote a more active, evidence-based, and results-driven assessment of new and emerging financial solutions.

The Framework

The Regulatory Sandbox is a controlled, time-bound, live testing environment, featuring regulatory waivers at the regulator’s discretion, to promote the development of transformative technologies under the “test-and-learn” approach. Eligible participants must operate within testing parameters (including metrics to assess the viability of the solution being offered) agreed upon with the BSP.

It applies to entities that intend to offer or use any emerging or new technology to deliver financial products and services within the BSP’s regulatory authority.

Consumer Protection

Under the Framework, participants must adopt measures to protect consumer rights and interests. They must inform customers (i) that the product or service offered is under the Framework and the possible risks associated with such product or service and (ii) of the related complaints handling and dispute resolution procedures, ensuring that adequate, prompt, and effective mechanisms or procedures for handling and resolving disputes covering regulatory sandbox issues are in place.

All regulatory sandbox experimentation must follow the rules and regulations on data sharing, data privacy, and data protection in all phases. The right to control the use of customer data are limited to the boundaries of the consent provided by the customer in availing the product or service.

LIFTING OF MORATORIUMS

Digital Banks

On 26 December 2024, the BSP issued BSP Circular No. 1205, lifting the moratorium on the issuance of new digital banking licenses starting from 1 January 2025, and allowed a maximum of ten digital banks to operate in the Philippines. There are currently six digital banks operating, providing four open slots for new digital banks.⁵BSP Circular No. 1205, S. 2024

Existing banks may apply for conversion to a digital bank, but they must comply with the applicable requirements for a digital bank, including the minimum capital requirement of PhP1 billion. The applicant must also submit an acceptable plan to address how the transition (“Transition Plan”) to a digital bank will be managed. The applicant must implement the Transition Plan within a period of three years from approval of the MB.

Incidentally, existing banks assessed by the BSP as having a highly digital-centric business model will be required to comply with the requirements applicable to a digital bank.⁶BSP Circular No. 1205, S. 2024

Electronic Money Issuers

On 16 December 2024, the BSP also approved the lifting of the three-year moratorium on the regular applications for new EMI-NBFIs. However, it appears that the BSP will be more stringent in granting licenses.⁷MB Resolution No. 1400, S. 2024

BSP now adopts a data-driven approach in screening applications. NBFI applicants, who wish to be licensed EMIs, must submit applications that have undergone market research and data-driven analysis process. It must present insights on the planned business model and target market, through evidence-based market study to increase its value proposition in the industry. Applicants must also meet the standard licensing criteria, which includes assessment on transparency of ownership and control structure, suitability of shareholders and propriety of directors and senior management, adequacy of capital, and the presence of a risk management system. In addition, the BSP expressly stated that only applications that involve new business models, unserved market, targeted niches, or new technologies will be accepted for processing.⁸BSP Memorandum No. M-2024-046 Thus, entities that now seek to be issued an EMI-NBFI must stand out from the field. Applicants must bring something new to the table that current license holders are not presently offering to the public. At the same time, the updated policy would encourage competition and innovation in the industry, while promoting non-conventional payment options.

CONCLUSION

The shift to the PPSA is expected to contribute to financial inclusion by allowing more people and businesses to use their assets to access formal lending channels. This is particularly important in the Philippines, where a significant portion of the population has been traditionally underserved by the banking sector. With the full implementation of the PPSR, the Philippines is now a step closer to the goal of a more inclusive financial system.

The BSP has noted that technology is one of the major drivers of financial inclusion and that financial service providers have been utilising technology by investing in platforms or systems that can create products and services particularly in payments and credit or loans that are suitable to the Filipinos, especially those who are underserved or unserved. Thus, with the issuance of the Regulatory Sandbox Framework, it is expected that more and new entrants will move swiftly and offer products tailored to the needs of underbanked businesses and consumers. The issuance of the FPSCPA will ensure that financial consumers will remain protected notwithstanding the surge of new financial products and services, including those driven by technology.

With the lifting of the moratoriums for the issuance of licenses for digital banks and EMI-NBFIs, the BSP aims to maximize the potential of innovative entities to introduce new or emerging business models. At the same time, the strict requirements ensure that any of the attendant risks are minimized and the playing field between incumbent banks and new players in the market is leveled.