BSP: FIST law needed vs. Covid-19’s impact on banks

MANILA – Monetary authorities are pushing for the enactment of the proposed Financial Institutions Strategic Transfer (FIST) law to help banks facing difficulties amid the coronavirus disease 2019 (Covid-19) global pandemic.

In a virtual briefing Thursday, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said the proposed law is an enhancement to the Special Purpose Vehicle (SPV) Act of 2002, which gave exemptions on fee privileges to SPVs that invest in non-performing assets of the banks.

Under the proposal, Diokno said financial institutions may sell their non-performing assets (NPAs) to FIST corporations, which will be created as asset management corporations (AMCs) that will provide incentives to the FIs.

He said this system will allow FIs to clear up their NPAs and have the additional funds to lend to their clients.

The AMCs can either be state-owned or private entities that will be given fiscal incentives, he added.

Diokno said the proposed FIST Law will also be time-bound, but he did not elaborate pending the deliberations in the House of Representatives.

While the proposed law aims to address any difficulties that banks may face as a result of the pandemic caused by the Covid-19, Diokno said Philippine banks remain strong due to the reforms instituted in the past.

He said the non-performing loan (NPL) ratio as of end-March this year remained low at about 2.2 percent.

Diokno said authorities conducted a stress test for the sector and this showed that even if the NPLs rise to as much as 5 percent, this level remains manageable.

He said the BSP has prepared the banking system “well so there’s no immediate threat to the banking system on the NPL but we don’t know the extent of this pandemic.”

“I guess it’s better to have it (FIST Law) now in anticipation of what might happen if things deteriorate,” he added.

During the same briefing, Deputy Director Noel Neil Malimban of the Financial Supervision Legal Group at Office of the General Counsel and Legal Service, said they do not have the current figures on banks’ NPAs “ but there are reports already of banks that are going to book an increase or anticipate an increase in NPAs.”

“So it’s better to have this law enacted when we need it (so that) we (readily) have it rather than waiting for the time that we already need it and we still have to (wait for) Congress (to act on it),” he added.