MANILA, Philippines — The House of Representatives has approved a bill seeking to provide assistance to banks and financial institutions hard hit by the coronavirus disease 2019 (COVID-19) crisis.
In virtual session Thursday night, the House plenary passed on second reading House Bill 6816 or the proposed Financial Institutions Strategic Transfer (FIST) Act.
Lawmakers decided via voice vote to approve the measure, authored by banks and financial intermediaries committee chairman and Quirino Rep. Junie Cua.
“This is a program to help our banks recover from the crisis and become liquid again... At the end of the day, a vibrant, healthy financial sector is what we need if we are aspiring for a speedy economic recovery,” Cua said in his sponsorship speech.
The chamber passed the measure just two days after it was approved by the Defeat COVID-19 Committee on first reading.
The FIST bill aims to help financial institutions in their bad debt resolution and management of their non-performing assets (NPAs) to cushion the adverse impact of COVID-19 pandemic on their financial operations.
Cua lamented that most financial institutions are facing a period of delayed loan collections and are at risk of recording higher NPAs across all borrower segments.
NPAs consist of financial institutions’ nonperforming loans (NPLs) and real and other properties acquired (ROPAS) in settlement of loans and receivables.
Under the bill, the transfer of NPAs from the financial institution to financial institutions strategic transfer corporations shall be exempt from documentary stamp tax, capital gains tax, creditable withholding income taxes imposed on the transfer of and/or buildings and value-added tax on the transfer of NPAs.
The measure encourages the private sector, government financial institutions, and government-owned or-controlled corporations to incorporate and invest in FISTCs and help in the rehabilitation of distressed businesses with the end view of contributing to economic growth.
“This proposed law encourages financial institutions to sell NPAs to asset management companies or FISTCs that specialize in the resolution of distressed assets,” Cua said.
The lawmaker stressed that the measure would be more effective than simply amending Republic Act 9182 (Special Purpose Vehicle Act), which provides for similar tax incentives for SPVs.
In an earlier hearing, Bangko Sentral ng Pilipinas (BSP) general counsel Elmore Capule agreed that “mere revival will result in a lot of gaps which we have to fill up by regulation.” This would force the Securities and Exchange Commission (SEC) or the BSP to quasi-legislate.
“It’s better that we come up with a new law, update everything, especially the tax exemption privileges. And then ensure that all the new policies that have come up for the last 18 years will be included in this new law than a mere revival,” Capule said.
BSP managing director for policy and specialized supervision Lyn Javier added that the swift enactment of the FIST Law, despite strong banking fundamentals, will promote investor and depositor confidence and mitigate the harmful feedback effect of a financial system crisis on the real economy.