UnionBank seeks BSP capital relief for digital bank integration

MANILA, Philippines — Union Bank of the Philippines is seeking exemptions from certain capital requirements as it moves to integrate its digital banking subsidiary UnionDigital Bank into its operations by April 2027.

In a disclosure to the local bourse, the Aboitiz-led lender said it has requested regulatory relief from the Bangko Sentral ng Pilipinas (BSP) to avoid additional capital injections and deductions from its regulatory capital arising from the planned consolidation.

“Given the planned business integration, a capital infusion into UnionDigital will no longer serve its intended prudential objective and would result in unnecessary capital movements,” the bank said.

UnionBank is also requesting BSP approval to exclude its equity investment in UnionDigital from deductions in computing the parent bank’s regulatory capital ratios.

These ratios measure a bank’s financial strength by comparing its available capital against its risk-weighted assets, including loans and investments.

“The continued deduction of the equity investment amount in UnionBank’s qualifying capital would not reflect the economic substance of the integration,” the lender said.

The requests remain subject to BSP approval.

The disclosure provides additional details on UnionBank’s plan to integrate the businesses of UnionDigital and financial technology subsidiary UBX Philippines Corp. into its parent operations.

UnionBank said the two subsidiaries would undergo separate transactions, with different implementation timelines.

For UnionDigital, the consolidation will be carried out through a business transfer agreement, under which UnionBank will purchase certain assets and assume certain liabilities of the digital bank.

The transaction is targeted for completion by April 2027.

Meanwhile, the integration of UBX will involve the transfer of selected assets to UnionBank, with the transaction expected to be completed by the end of November this year.

Both transactions remain subject to regulatory approvals, including those from the BSP and other relevant authorities.

The bank said the consolidation would allow it to combine assets, capabilities and resources under its parent operations, while simplifying its corporate structure.

Based on the disclosure, UnionDigital has paid-up capital of P9.8 billion, with UnionBank holding virtually all of its outstanding shares.

UBX, meanwhile, has a paid-up capital of P480 million. UnionBank owns 83.33 percent of the fintech company, while SBI Ventures Asset Pte. Ltd. holds 16.67 percent.

UnionDigital provides digital deposits, lending, payment services and other financial products, while UBX focuses on financial technology and information technology services supporting the group’s digital initiatives.

The bank earlier assured customers of UnionDigital that they could continue accessing their accounts, deposits, loans and other services without interruption during the transition.

The consolidation comes as UnionBank reported a 53-percent increase in net income to P9.9 billion from January to September, supported by stronger interest earnings and fee income.