The Bangko Sentral ng Pilipinas (BSP) will begin accepting applications next month for technical assistance (TA) from rural banks that need financing to upgrade their core banking systems.

Under a memorandum signed by BSP Governor Eli M. Remolona, Jr., the central bank said rural banks may apply for assistance to fund their transition from legacy information technology (IT) systems to cloud-based core banking systems (CBS) delivered under the software-as-a-service (SaaS) model.

A SaaS CBS is a cloud-hosted system operated by an external provider and accessed by the bank over secure electronic channels on a subscription or usage basis. Under BSP regulations, such an arrangement is treated as outsourcing of IT systems.

The initiative forms part of the approved Rural Bank Strengthening Program (RBSP) TA, which comprises Digitalization, Financial Advisory, and Capacity Building components designed to accelerate the digital transformation of rural banks and enhance their operations, capacity, and competitiveness, the BSP said.

Launched in 2022, the RBSP aims to boost rural banks' resilience so they can continue supporting the economy, in recognition of their role in promoting countryside development and financial inclusion. Funding for the upgrade of banking systems falls under the RBSP Digitalization TA, tying the program's long-running goal of strengthening rural lenders to a specific technology shift that requires banks to meet both operational and regulatory standards.

"The TA shall include assistance 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 RBs," the BSP said.

"In the long run, the TA likewise aims to support the viability and competitiveness of RBs amid the increasing digitalization in the financial system."

The application period opens on Sept. 12, with the deadline to be announced at a later date. Eligible banks may receive financial and operational support for a six-month implementation period followed by a three-year subscription that covers continued access to and operation of the CBS and related support services.

The BSP will provide support for services including system configuration, data migration, system integration, testing, user training, commissioning, cloud infrastructure, technical support, system updates, and maintenance services.

Applications must include a letter outlining the bank's interest and long-term strategies. Applicants are also required to submit a corporate secretary's certificate confirming the board of directors' approval of the TA application, a certificate of compliance with capital computation, the bank president's certification proving they do not have an existing SaaS CBS, and their accomplished self-assessment checklist and IT outsourcing questionnaire.

"The BSP shall also consider the bank's overall risk profile, latest supervisory assessment, outsourcing risk management framework, information technology readiness, and operational capacity to support the prudent deployment, implementation, and sustainability of the TA," it added.

The BSP will have 25 banking days to assess a bank's application against its eligibility criteria and its regulations on outsourcing, technology, and risk management. That places the approval process within the same supervisory framework the central bank already uses for technology-related outsourcing, which is the basis for the SaaS model covered by the program. — Katherine K. Chan