Press Release
August 25, 2020

Poe panel to tackle aid to banks, financial institutions amid covid-19 crisis

Sweeping measures intended to aid banks and financial institutions impacted by the sluggish economic activity amid COVID-19 will be tackled in a Senate hearing to be led by Sen. Grace Poe.

The committee on banks, financial institutions and currencies, which Poe heads, together with committee on ways and means, will hold a public hearing via Zoom on August 26, Wednesday at 10:30 a.m. to deliberate on several bills seeking to help banks manage bad loans, deal with the surge in non-performing assets (NPAs) and rehabilitate struggling businesses.

"Banks and financial institutions need government assistance due to the near-economic paralysis caused by the pandemic," Poe said.

She said it is vital that these financial institutions stay afloat and maintain their financial viability to perform critical roles in coping with the crisis, such as distributing cash aid to needy families and providing loans to businesses to help them recover.

The hearing will discuss Senate Bill No. 1596 by Sen. Lito Lapid and Senate Bill No. 1594 by Sen. Imee Marcos both titled Financial Institutions Strategic Transfer (FIST) Act (An Act Ensuring Philippine Financial Industry Resiliency Against the COVID-19 Pandemic) and Senate Bill No. 1652 or The Special Purpose Vehicle Act of 2020 (An Act Granting Exemptions and Fee Privileges to Special Purpose Vehicles Which Acquire or Invest in Non-Performing Assets) by Sen. Ralph Recto.

Both SB 1596 and 1594 pitch for the enactment of measures for banks and financial institutions that would encourage them to sell their NPAs to the FIST to be created under the bills.

As a body that will specialize in resolution of distressed assets, the FIST companies will bring in new capital and expertise in dealing with NPAs, rehabilitating failed businesses and increasing available lending through the financial sector.

SB 1652, meanwhile, proposes the establishment of asset management companies such as the special purpose vehicle (SPV) for the purpose of acquiring or investing in NPAs of the banks and other financial institutions.

According to the bill, the SPVs will be afforded an opportunity to reap profits from the subsequent disposition of valuable NPAs which are usually acquired at a discounted price. Furthermore, to encourage the private sector to establish SPVs, the bill seeks to grant certain tax exemptions and fee privileges on the sale or transfer of NPAs.

Citing data from the bill, Poe said that as of April 2020, the non-performing loan ratio stood at 2.3 percent of the bank's total loan portfolio.

"These bills will act as a lifeline to the banks and financial institutions that are our partners in jumpstarting the economy," Poe said.

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