THE Philippine Competition Commission (PCC) warned against the possible competition-weakening effects of a recently-signed law that will relieve banks of non-performing loans.

“What we have learned from experiences of crises in the last 50 or so years is that relaxing competition is not the way to go,” PCC Chairman Arsenio M. Balisacan said in a briefing Monday, in response to a question on the recent signing of the Financial Institutions Strategic Transfer (FIST) Act.

“Once the crisis is over, it’s extremely difficult to remove those (policies) that are already in place.”

He did not elaborate on the exact process by which competition will weaken.

The FIST law allows banks to unburden themselves of non-performing loans by transferring them to FIST Corporations (FISTCs), a type of Asset Management Company specializing in managing distressed assets. The law does not accommodate the PCC’s traditional role of approving major acquisitions, during which the commission weighs in on whether the deal reduces competition.

The PCC, Mr. Balisacan added, advocates against setting aside competition policy to survive economic crises. The FIST Act was specifically drafted to help banks deal with the fallout of the coronavirus disease 2019 (COVID-19) pandemic.

“In fact, we should strengthen competition because if we allow, for very weak reasons, consolidation that would lead to strengthening of the ability or the incentive to abuse market power then you’ll have already forestalled the ability to achieve faster and more sustainable growth in the future,” he said.

Article 6 of the law requires financial institutions and FISTCs to submit a database of their sales and transfers to the PCC every month. A requirement to consult with PCC before an asset transfer was removed.

Banking groups supported the signing of the law, saying that it would help them recover from an increase in non-performing loans during the pandemic and improve lending activity going forward. — Jenina P. Ibañez

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