The Bangko Sentral ng Pilipinas (BSP) issued voluntary guidelines on artificial intelligence use for banks and e-wallet operators through Memorandum No. M-2026-031, establishing minimum supervisory expectations for responsible AI deployment. The guidelines address how financial institutions should handle AI systems already analyzing payment patterns, verifying customer identities, and detecting fraud across the Philippines. BSP Deputy Governor Lyn Javier stated in a press release on Tuesday, July 14, that the principles help institutions innovate while mitigating unintended consequences from AI technology. The memorandum introduces governance principles while AI usage expands across Philippine financial services, where a 2024 BSP survey found 44% of responding institutions had deployed at least one AI system.
BSP Establishes STARS Governance Principles for AI Systems
The BSP introduced five governance principles summarized by the acronym STARS: sustainability, transparency, accountability, responsibility, and security. Deputy Governor Lyn Javier stated that STARS provides financial institutions with principles to innovate while mitigating unintended consequences from AI technology. The memorandum requires that customers be notified when AI output is used in a product or process, with institutions disclosing relevant limitations when AI results could be misinterpreted or misused. Users must be able to question how an output was produced and why a recommendation was made.
In the 2024 BSP survey, 21 out of 48 responding financial institutions had deployed at least one AI system, while 60% included AI or machine learning in their technology roadmaps. Common uses included fraud and anti-money laundering monitoring, electronic know-your-customer checks, credit-risk scoring, personalized product recommendations, and generative AI tools. GCash disclosed that AI and machine learning help detect scams, fraud, money laundering risks, and unauthorized access, while analyzing transaction patterns to determine service suitability. UnionBank uses AI in customer-facing chatbots, to assist employees making account decisions, and for real-time fraud detection.
Financial Institutions Must Maintain Human Oversight in AI Decisions
The BSP memorandum states that humans remain ultimately accountable for decisions made with AI assistance. The guidelines specify that while AI systems provide recommendations, humans are ultimately accountable for decisions made, and AI output should not replace or diminish human responsibility. The BSP does not explicitly prohibit using AI in credit decisions, allowing algorithms to analyze borrower income, transactions, payment behavior, or other data and recommend whether applications should be approved or rejected.
Financial institutions cannot leave final responsibility to machines and must establish safeguards, assign clear ownership of AI systems, and monitor results for errors and unfair outcomes. Banks and e-wallets must maintain human oversight throughout AI-assisted processes, with persons or teams remaining accountable for final decisions.
BSP Addresses Bias Prevention in AI Training Data
The BSP acknowledged in its memorandum that AI systems may perpetuate biases, leading to unfair practices and exclusion of individuals from access to financial products and services. This risk arises when AI models are trained using incomplete, inaccurate, or unrepresentative information, potentially disadvantaging low-income borrowers, minorities, vulnerable consumers, or people with limited access to formal financial services.
The BSP recommended that training data be well-prepared, well-represented, and free from unauthorized interference, while ensuring AI systems do not cause harmful effects on any demographic, particularly minority or vulnerable groups. Institutions must protect personal data, provide clear opt-in or opt-out mechanisms where applicable, and monitor systems for hallucinations, or instances when generative AI produces false or invented information.
Guidelines Remain Voluntary with No Compliance Deadline
The BSP opted for voluntary, principles-based guidance because institutions differ widely in size, technological capability, and how extensively they use AI. The guidelines are non-binding, meaning financial institutions are encouraged but not expressly required to adopt them. Currently, there is no specific compliance deadline or penalty for failing to adopt a formal AI governance framework.
The BSP stated it would monitor developments in the field and, whenever necessary, issue appropriate regulations or policies to foster innovation and preserve the stability and competitiveness of the financial system, leaving open the possibility that current voluntary guidelines could eventually form the basis of stricter, enforceable rules.
FAQ
Can AI reject a bank loan application in the Philippines?
AI may analyze borrower data and recommend loan approval or rejection, but the BSP requires that humans remain ultimately accountable for final decisions. Financial institutions cannot leave responsibility solely to machines and must maintain human oversight, establish safeguards, and monitor AI results for errors and unfair outcomes.
What must Philippine banks disclose about their AI systems?
Banks and e-wallet operators must notify customers when AI output is used in a product or process and disclose relevant limitations, particularly when results could be misinterpreted or misused. Users must be able to question how outputs were produced and why recommendations were made, according to BSP Memorandum No. M-2026-031.
