Senate panel starts discussion on FIST bill amid tenuous response from economic officials

Senators and finance officers agreed on Wednesday on the need to pass a measure to protect and help prepare the country's banking sector in the face of recession-related impacts of the COVID-19 pandemic.


The Senate Committee on Banks, Financial Institutions and Currencies began its deliberation of the proposed Financial Institutions Strategic Transfer (FIST) Act, which seeks to assist banks and financial institutions cope with the effects of the coronavirus outbreak and the quarantine rules that the government had imposed to contain it.

The bill was also mentioned as a legislative priority in President Duterte's State of the Nation Address last month. A counterpart bill was already approved on third and final reading in the House of Representatives.

The FIST bill seeks to set-up mechanisms allowing banks and financial institutions to dispose of their non-performing assets (NPAs) or loans (NPLs) to asset management companies through the grant of tax incentives.

"We see that the threat to our banks is not immediate. But like all things pandemic, we have to prepare," Senator Grace Poe, banks committee chair, said.

"It might be better to deliberate now rather than later. Mabuti nang handa tayo kung sakaling kailanganin (It's better that we are prepared for when it is needed)," she added.

The Bangko Sentral ng Pilipinas (BSP), as well as the Bankers Association of the Philippines, expressed strong support for the approval of the measure.

Lyn Javier, BSP's managing director for policy and specialized supervision, said that while current level of bad debts remain manageable and that banks have "sufficient" buffers to cover the COVID-19 impact, the failure to prepare for the expected increase of NPAs could "adversely affect" the confidence of investors and cause the rise in unemployment and further economic slowdown.

She recalled the deterioration of the country's banking system years after the Asian Financial Crisis in 1997.

"The enactment of the FIST law will assist the financial system in efficiently mobilizing savings and investment for the country's economic recovery and sustaining growth and development," Javier said.

Javier said the NPL ratio as of June stands at 2.5 percent, and is expected to increase to 4.6 percent by the end of this year.

Two agencies under the Department of Finance (DOF), however, differed on their positions on the bill.

The Bureau of Internal Revenue (BIR) said it does not favor the tax exemptions in the FIST bill as it would affect the government's tax collections. 

The Bureau of Treasury, on the other hand, estimated that the government will lose only P3.3 billion to P13.3 billion in revenues in five years as it projected that only 25 percent of banks and financial institutions would avail themselves of the tax benefits.

It echoed the DOF's "strong support" of the bill and appealed for its passage by December.

Senator Franklin Drilon also backed the measure, lauding the committee for starting early its hearings on the matter "to respond to the expected difficulties many of our industries may experience".

'Cavalier attitude'

The lawmakers, however, expressed disappointment over the absence of key finance officials in the hearing. 

Drilon particularly scolded the BIR's representative, who failed to substantiate the agency's opposition to the bill.

"Because of the tax will affect our collection for the year. We're not in favor of the exemptions given," the BIR representative said over teleconference. 

When Poe specifically asked for figures to determine possible impact to government revenues, the BIR representative replied: "In terms of our collection, it will affect because...there's an adverse impact on our collection."

Drilon then intervened and said the BIR should have sent a more ranking authority to speak for the agency, stressing the importance of their participation in the deliberation of the FIST bill.

"The BIR is a very important resource person here as there will be tax incentives granted and it will affect our revenue stream, with all due respect to the representative of the BIR, I wish they would send somebody more ranking who can speak for the BIR and we could hardly understand the statement of the BIR representative," he said.

"I am disappointed at the cavalier attitude being taken by the BIR on the passage of this measure. It would appear that the committee and the Senate is more interested in the passage of this measure...The BIR has taken a cavalier attitude and is not even prepared to state its proposition."

"While the BSP and DOF are in support of this bill, here comes the BIR saying that they are opposed to the bill," Drilon lamented.

Poe agreed with Drilon, also saying that the government finance managers should also heed its call for unity amid the recession.
"I’d like to note also that this is a priority measure, and yet it’s disappointing to see that the heads of agencies didn’t really attend,” Poe said. 

“They’re the ones saying that the economy needs it now. So, how will we know for sure that the economy needs it now if we don’t even have a commitment, an actual presence from those heads explaining to us in detail what their commitments are also and the safeguards they’re willing to accept," she added.

The hearing will continue at another date as senators called for the presence of top finance and economic officials of the Executive department.