Press Release
August 26, 2020

Senate Committee on Banks, Financial Institutions and Currencies hearing on FIST Act
Aug. 26, 2020

Good morning. This hearing is called to order.

We are now officially in recession. Nararamdaman na natin ang epekto ng mga lockdown sanhi ng COVID-19 pandemic. Ayon sa Philippine Statistics Authority, lumiit ng 16.5 percent ang ating ekonomiya kumpara sa parehong panahon noong nakaraang taon. Inaasahang ito ang pinakamalaking pagbagsak ng ating Gross Domestic Product mula noong 1985.

This crash precipitated urgent measures from the government. One of which is the recently passed Bayanihan 2 which will pump around P165 billion to stimulate economic activity.

Another solution is the one presented to us today for consideration. Monetary authorities are pushing for the enactment of the proposed Financial Institutions Strategic Transfer (FIST) law to help all banks sell their non-performing assets while availing of fiscal incentives.

Hindi na ito bago para sa ating mga bangko. Noong tumama ang 1997 Asian Financial Crisis ay pinayagan rin ang ilang mga banko na linisin ang kanilang balance sheets gamit ang mga fiscal incentive sa ilalim ng Special Purpose Vehicle (SPV) Act of 2002.

This new measure is expected to have the same effect as SPV. Based on the Securities and Exchange Commission data, a total of 31 SPVs were registered with the SEC. BSP data showed that these SPVs enabled the offloading of P88 billion worth of loans under the original SPV, while P31.95 billion of loans passed through the amended SPV.

Kung ating susuriin, isinabatas ang SPV Law limang taon pa matapos tumama ang Asian Financial Crisis noong 1997. Kaya naman kailangan nating tanungin kung ito na ba ang kailangan natin ngayon habang hindi pa natin alam ang tunay na epekto ng pandemya sa ating ekonomiya.

Based on the preliminary baseline assessment conducted by the BSP to estimate the impact of the COVID-19 pandemic, top banks in the country see their Non-Performing Loan or NPL ratio to be at 4.63 percent, 6.19 percent, and 11.51 percent for the Top 20 Universal and Commercial Banks, Thrift Banks, and Rural & Cooperative Banks, respectively. This is compared to last year's 2.1 percent.

Based on these numbers alone, and the assurances from the banking sector, we see that the threat to our banks is not immediate. But like all things pandemic, we have to prepare.

It might be better to deliberate now rather than later. Mabuti nang handa tayo kung sakaling kailanganin. This Committee would like to stop playing catch-up with the pandemic and prepare the policy for the worse.

I would like to acknowledge the presence of my fellow senators, a lot of them experts in the field of economics and finance, and I am glad they could join us today and committed to deliberate this measure. I would also like to thank the agencies and experts from the banking sector who are here with us today.

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