PRESIDENT Duterte signed into law on Tuesday the Financial Institution Strategic Transfer (FIST) bill, Finance Secretary Carlos Dominguez said.
Seen to cushion the impact of the pandemic on the financial sector, the FIST bill allows financial institutions to offload nonperforming assets (NPAs) by selling them to asset management firms so they could lend more to pandemic-hit businesses.
NPAs refer to nonperforming loans (NPL) and real and other properties acquired in settlement of loans.
“FIST signed by PRRD today, Feb. 16, 2021,” Dominguez said in a message to finance reporters.
The finance department earlier said FIST would result in foregone revenues of P3.3 billion to P13 billion every year for the next five years as the measure provides tax incentives to defray the transaction and transfer costs of nonperforming assets to asset management companies.
Should all tax benefits be availed of in the next five years, the DOF also earlier said the “size of losses is manageable when compared to the potential risks from another possible financial crash.”
The finance department has also vowed to ensure that no public resources would be wasted as the incentives will be reviewed through a monitoring mechanism under the bill.
In the Philippines, NPLs saw substantial growth in the past year as lockdown protocols slowed down economic activities while pushing up joblessness.
Latest Bangko Sentral ng Pilipinas data showed NPLs reached P391.67 billion as of end-December 2020, or 74.77 percent more than P224.11 billion year-on-year. This as total loan portfolio slipped by 1 percent to P10.86 trillion by the end of last year from P10.97 trillion in 2019.
Meanwhile, gross NPL ratio slowed down to 3.61 percent in December from 3.78 percent in the previous month.
It was in December when the banking sector saw the NPL ratio dip for the first time in 2020. The banking industry started last year with a bad loan ratio of 2.16 percent in its books. The figure continued to rise month after month and peaked in November last year.
Still, the December figure is higher than the 2.04 percent notched in 2019. However, it is still below the Central Bank’s forecast of 4.6 percent for the year.
Apart from the FIST bill, the DOF is also pushing for the passage of other “economic recovery measures,” including the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill and the Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery (GUIDE) bill.