Senate to tackle stimulus measures to help banks, financial institutions ride out COVID-19 impacts

The Senate will start tackling on Wednesday, August 26, stimulus measures to help banks and financial institutions ride out the impacts of the COVID-19 pandemic.

(Senate of the Philippines / FILE PHOTO / MANILA BULLETIN)

The Committee on Banks, Financial Institutions, and Currencies and the Committee on Ways and Means will conduct a hybrid hearing on the bills aimed at helping 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," Senator Grace Poe, chairperson of the Banks Committee, said.

Poe underscored the importance of assisting these institutions to maintain their financial viability, citing their critical roles in distributing cash aid to poor families and providing loans to businesses.

The Senate committees will specifically discuss  Senate Bill No. 1596 and  Senate Bill No. 1594 on the proposed Financial Institutions Strategic Transfer (FIST) Act, which economic and finance managers have been pushing as part of the government's stimulus and recovery efforts; as well as Senate Bill No. 1652, The Special Purpose Vehicle Act of 2020.

SB 1596 and 1594, filed by Sens. Lito Lapid and Imee Marcos, respectively, seeks to encourage banks to sell their NPAs to the FIST, which will specialize in the resolution of distressed assets, bringing in new capital and expertise in dealing with NPAs, rehabilitating failed businesses, and increasing available lending through the financial sector.

SB 1652, filed by Sen. Ralph Recto, 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.

The bills state that the SPVs will be afforded an opportunity to earn profits from the subsequent disposition of valuable NPAs which are usually acquired at a discounted price. Furthermore, it also seeks to encourage the private sector to establish SPVs through 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.