Bill to help banks handle bad loans pushed
Economic managers and tax authorities are willing to forego up to P65 billion in revenues during the next five years from the pending bill aimed at ridding banks of bad loans building up amid a COVID-19-induced recession.
“The FIST Act we are proposing is an improved version. It will protect the financial sector from any lasting damage and ensure that credit will be steadily available during this crisis and in the recovery stage. At the same time, the proposed FIST provides safeguards for consumers,” Finance Secretary Carlos G. Dominguez III told senators during a hearing on the proposed Financial Institutions Strategic Transfer (FIST) bill.
“Once enacted, FIST will help the financial system mobilize credit for the productive segments of the economy by keeping soured assets from spoiling the rest of the sector. It will also encourage the private sector, government financial institutions and government-owned or -controlled corporations to help rehabilitate distressed businesses,” Dominguez said.
“By allowing banks to outsource the management of nonperforming assets, FIST will help banks focus on what they do best: lending to sectors in need of credit. By keeping nonperforming assets contained and managed, FIST will expand the amount of risk banks can take. This benefit cannot be understated in a crisis, when lending to businesses is riskier but also more urgently needed,” Dominguez added.
Dominguez said FIST would extend tax perks to asset management firms, which would defray the transaction as well as transfer costs of nonperforming assets.
“We believe that the economic benefits of strengthening the financial sector through this effort outweigh the fiscal costs of doing so. We are willing to forego revenues for the next five years to clear the banks’ books and keep the economy going,” according to Dominguez. —BEN O. DE VERA
