BANKING GROUPS welcomed the signing of the Financial Institutions Strategic Transfer (FIST) Act and hope it will spur bolster credit growth as the crisis continues.
“With this measure, banks can gradually recover from non-performing loans (NPLs) that have increased due to the pandemic. As financial institutions utilize the special purpose vehicles, banks may now continue to increase lending activities to help spur economic activity,” the Bankers Association of the Philippines said in a statement on Thursday.
The group said they are waiting for the implementing rules and regulations (IRR) of the new law.
The law covers the transfer of non-performing loans and assets from banks to asset management companies or FIST corporations. Loans and assets classified as non-performing as of Dec. 31, 2022 will be eligible for transfer.
“All those NPLs (non-performing loans) and NPAs (non-performing assets_ that become such on or before Dec. 31, 2022 are eligible, that’s just the cut-off,” Noel Neil Q. Malimban, deputy director at the BSP Office of General Counsel and Legal Services, said in an online briefing on Thursday.
“There’s no distinction as to whether it’s from the start of the lockdown because all of these [NPLs and NPAs] are affected by the pandemic, whether it’s directly due to the lockdown or not. The aim is to help the financial institutions get rid of these bad assets,” he added.
Chamber of Thrift Banks Executive Director Suzanne I. Felix said the FIST law’s enactment was “just in time”, noting credit raters have warned about the industry’s asset quality which will likely deteriorate further this year as the loan moratorium expired in December last year.
Ms. Felix said they also welcome the tax exemption measures in the law and considers it “pain sharing” with the government.
Under the law, exemptions will be applicable for payments of documentary stamp tax, capital gains tax, creditable withholding income taxes and value-added tax (VAT) in relation to the transfer of non-performing assets from a financial institution to the FIST corporation or from a FIST corporation to a third-party buyer or borrowers.
Rural Bankers Association of the Philippines President Elizabeth C. Timbol meanwhile said they are hopeful the law’s implementing rules will be inclusive of the needs of smaller lenders.
“We expect that the IRR would provide simple and efficient procedures that will allow different stakeholders to avail of the benefits and privileges FIST aim to provide specially for rural banks like us,” Ms. Timbol said in a text message.
“We are hoping that this law will not only focus on big loan accounts but also with micro-loans, where a big portion of rural banks’ portfolio is allocated to,” she added.
The banking industry’s NPL ratio stood at 3.61% as of December, higher than the 2.08% a year earlier but still better than BSP’s 4.6% projection.
BSP Governor Benjamin E. Diokno has said the law could trim banks’ non-performing loan ratio by 0.63 to 7 percentage points. He said the IRR for the law is being circulated among industry players to garner sentiments.
Estimates from the National Economic and Development Authority showed the law could free up P1.19 trillion in bad loans from banks’ portfolio, according to a statement from the Department of Finance. — Luz Wendy T. Noble