House panel approves tax exemptions for financial institutions disposing non-performing assetsBy JON VIKTOR D. CABUENAS, GMA News
The House of Representatives committee on banks and financial intermediaries on Monday approved a measure seeking to assist banks and other financial institutions offload their non-performing assets (NPAs) in light of the coronavirus disease 2019 (COVID-19).
Introduced by Quirino District 1 Representative Junie Cua, House Bill 6622 encourages financial institutions to sell their NPAs to Financial Institutions Strategic Transfer Corporations (FISTCs).
"(T)his bill proposes the financial institutions in their bad debt resolution and management of their NPAs in order to cushion the adverse impact of COVID-19 pandemic on their financial operations," the bill read.
The measure was approved at the committee level during a virtual hearing via Zoom on Monday, May 11.
"In order to respond to the looming increase in NPAs, the state must enact measures to help banks and other financial institutions offload their NPAs, induce economic activity, and improve the liquidity of the financial system to propel economic growth," said Cua.
NPAs consist of non-performing loans (NPLs) and real and other properties acquired (ROPA) by financial institutions. Loans are considered NPLs or bad loans when a debtor has not made any payments of interest or principal within 90 days, or is 90 days past the dues.
This comes as a simulation by the Bankers Association of the Philippines (BAP) showed that non-performing loans or bad loans could increase to 20% of total loans in the next months from the current 5% share.
"The proposed law extends support to financial institutions, as well as FISTCs, in disposing their NPAs by granting tax exemptions and reduced registration and transfer fees on certain transactions involving NPAs," said Cua.
The measure has since gained support from the economic cluster led by Finance Secretary Carlos Dominguez III.
"We are for the swift passage of this legislation, primarily because we want to clear the decks as soon as the bad debts we expect to start coming in... as soon as they start hitting the books of banks," he said during the hearing.—AOL, GMA News