Marcos proposes bill to aid banks, financial institutions unload 'toxic assets'

Katrina Domingo, ABS-CBN News

Posted at Jul 13 2020 03:46 PM

Sen. Imee Marcos said the government must move on from a belated travel ban and think of more comprehensive measures to stop the spread of the novel coronavirus in the country. February 3, 2020. Senate Prib

MANILA - Sen. Imee Marcos on Monday pushed for the creation of asset management corporations that would help public and private banks to "sell their toxic, non-performing assets" during the coronavirus disease 2019 (COVID-19) crisis.

Under Marcos' Senate Bill No. 1594 or Financial Institutions Strategic Transfer Act, financial institutions may sell their non-performing assets to the Financial Institution Strategic Transfer Corporations (FISTCs) to help them stay liquid during the health and economic crisis.

"Unpaid loans and other non-performing assets are the virus infecting the country’s financial system and will test its resilience in the coming months," Marcos said in a statement.

"The FISTCs will bring new capital and expertise in dealing with non performing assets, rehabilitating failed businesses, and increasing available lending through the financial sector," she said in the bill's explanatory note.

"Greater liquidity means banks and other financial institutions will be able to lend more to keep businesses in operation," said Marcos, who chairs the Senate Committee on Economic Affairs.

The non-performing loans in banks are expected to increase to 20 percent from 5 percent in the coming months, she said, citing data from the Bankers Association of the Philippines.

Similar to the special purpose vehicles (SPVs) created in the wake of the 1997 Asian financial crisis, the FIST corporations proposed in the Marcos bill will address the pandemic's threat to the economy, it said.

Under the proposal, the FISTC will be a stock corporation, which is authorized to invest, acquire and "spend funds to renovate" non performing assets to make them more profitable for the government.

The agency can also "borrow money... for the purpose of paying operational and administrative costs."

The FISTC can also enjoy exemptions from income tax, documentary stamp tax, and mortgage registration fees "to encourage the infusion of capital" into the proposed agency, according to the bill.

"While the government has so far managed to keep the peso steady against the dollar with a strong balance of payments and international reserves, how long will this last if local businesses and exports remain weak?" Marcos said.

"Let’s not be complacent and plan for the months ahead," she said.