Philippine banks cheer passage of FIST Law

Philippine banks on Thursday cheered the passage of the law which would allow financial institutions to offload soured loans to asset management companies, which they said would lead to higher lending activities amid the COVID-19 pandemic.

The Bankers Association of the Philippines (BAP) expressed its support to the Financial Institutions Strategic Transfer (FIST) bill, which allows a corporation to invest in or acquire non-performing assets (NPAs) from financial institutions and engage third parties to manage and dispose of such assets.

"The Bankers Association of the Philippines (BAP) is supportive of the anticipatory passage of the FIST Act into law. Its timely enactment will further strengthen the role of the financial industry in the economic recovery of the country," it said in an emailed statement.

"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," it added.

FIST was signed into law by President Rodrigo Duterte earlier this week, backed by Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno, who said that the borrower's capacity may be weakened by a disruption in their cash flows by end-2020.

Data from the BSP shows that outstanding loans of universal and commercial banks, net of reverse repurchase (RRP) placements with the central bank, fell by 0.7% in December even as policy rates are currently at record lows -- the overnight reverse repurchase (RRP) facility at 2.00%, the overnight deposit at 1.5%, and the overnight lending facility at 2.5%.

The central bank reduced policy rates by 200 basis points in 2020 -- 25 basis points in February; 50 basis points each in March, April, and June; and another 25 basis points in November.

According to Diokno, the draft implementing rules and regulations (IRR) of the FIST Law is now with the Securities and Exchange Commission (SEC), and is now being circulated to the industry for comments.

"BAP looks forward to the issuance of the Implementing Rules and Regulations that will cover all NPAs and NPLs as of December 31, 2022 as provided by the law," the Bankers Association said. -- Jon Viktor D. Cabuenas/KBK, GMA News