The Philippine banking sector is buzzing with the promise of artificial intelligence, a technological wave poised to reshape everything from how banks interact with customers to the very algorithms that assess risk.
Yet, as local lenders increasingly explore the power of AI to streamline operations and unlock new efficiencies, the central bank is stepping in to ensure this digital transformation unfolds responsibly.
The Bangko Sentral ng Pilipinas (BSP) is actively drawing the lines for AI’s role in the nation’s banking landscape, signaling a proactive approach to a technology that holds immense potential but also carries inherent risks.
Later this year, the BSP is expected to release a set of comprehensive regulations specifically targeting the use of artificial intelligence within the financial industry. These forthcoming guidelines aim to fill the remaining regulatory gaps, estimated at 10% to 20% of AI applications not explicitly covered by existing, broader rules.
BSP fostering a robust AI ecosystem in PH banking
BSP’s Melchor T. Plabasan, senior director for technology risk. PHOTO CREDITS: Emilia Claudio
During a recent industry summit in Manila, the central bank’s commitment to fostering a “robust and trustworthy AI ecosystem” was recently underscored by Melchor T. Plabasan, the BSP’s Senior Director for Technology Risk.
Speaking at the “Asian Banking & Finance-Insurance Asia Summit 2025,” Plabasan highlighted the key pillars of the upcoming regulations: ethical AI deployment, rigorous management of algorithmic bias, and the crucial need for continuous improvement in AI’s accuracy when making financial decisions.
“It arose from the results of our gap analysis,” Plabasan said, emphasizing the BSP’s methodical approach. He stressed a fundamental principle: “AI is just a tool. [Its use] should not diminish the responsibility of financial institutions when it comes to upholding data privacy and confidentiality of the data control.” This statement serves as a clear message that while banks embrace technological advancements, their core obligations to customer protection remain paramount.
The BSP’s move comes at a time when Philippine banks are showing a strong inclination towards integrating AI into their operations. Plabasan noted the industry’s proactive stance in preparing the necessary risk management frameworks for this evolving technological terrain.
This enthusiasm is bolstered by ongoing national efforts to strategize for AI adoption, with bodies like the Department of Trade and Industry already outlining a national AI roadmap.
According to a recent report by CreditSights, the Philippine banking sector had closed 2024 on a high note, demonstrating generally strong loan growth in the fourth quarter fueled by a resurgence in capital expenditure. However, this positive momentum is tempered by rising concerns over non-performing loans (NPLs), particularly among certain major banks.
AI as a potential catalyst for boosting lending
Crucially, the BSP sees AI as a potential catalyst for boosting lending, particularly within the rapidly expanding digital banking sector in the Philippines. Plabasan pointed out that digital banks have been somewhat cautious in their lending activities and expressed optimism that more sophisticated AI-driven credit scoring could be a turning point.
“I would like to see the maturity of AI when it comes to credit scores,” he explained, anticipating that this advancement could “help increase the amount of money that can be lent by digital banks in particular, which can also drive profitability.”
The promise of more accurate and efficient credit assessments powered by AI could unlock financial access for a broader segment of Filipinos, aligning with the BSP’s long-term goals of greater financial inclusion.
Beyond the regulatory framework, the BSP is also investing in knowledge dissemination. Plabasan announced plans to publish whitepapers delving into various aspects of AI application in finance. These resources are expected to provide valuable guidance to financial institutions, offering insights into best practices, potential pitfalls, and the dynamic landscape of AI innovation.
The BSP’s proactive stance on AI regulation positions the Philippines at the forefront of responsible fintech development in the region. By establishing a clear set of guidelines, the central bank aims to foster an environment where technological innovation can thrive without compromising consumer trust or the stability of the financial system.
As algorithms increasingly shape the future of banking, the BSP’s guiding hand will be critical in ensuring that the power of AI serves the best interests of the Philippine economy and its citizens. The financial industry now awaits the specifics of these regulations, a move that promises to define the next era of intelligent banking in the Philippines.As algorithms increasingly shape the future of banking, the BSP’s guiding hand will be critical in ensuring that the power of AI serves the best interests of the Philippine economy and its citizens. The financial industry now awaits the specifics of these regulations, a move that promises to define the next era of intelligent banking in the Philippines.