Gov't may lose up to P13.2B in 5 years if Congress OKs FIST: National Treasurer

Katrina Domingo, ABS-CBN News

Posted at Aug 26 2020 08:33 PM

Peso bills are counted after they are dispensed from an ATM. Alec Corpuz, ABS-CBN News/file

MANILA - The government is expected to lose as much as P13.2 billion in the next 5 years should Congress pass a Bangko Sentral-backed measure that would cushion banks from the possible build up of bad loans due to the COVID-19 crisis.

The proposed Financial Institutions Strategic Transfer (FIST) Act — which "will set up mechanisms allowing banks and other financial institutions to dispose and transfer non-performing assets and loans" — was among the priority measures President Rodrigo Duterte enumerated in his 5th State of the Nation Address.

Foregone tax revenues due to the implementation of FIST is pegged between P3.3 billion and P13.2 billion for 5 years, National Treasurer Rosalia de Leon told the Senate Committee on Banks, Financial Institutions and Currencies.

"I think it would depend on how much non-performing loans there will be per year," she said.

Under the proposed measure, all non-performing assets sold to FIST corporations will be exempted from documentary stamp tax, capital gains tax, creditable withholding income taxes, and value-added tax.

The Bureau of Internal Revenue (BIR) opposed the passage of the measure.

"While the Bangko Sentral and the Finance secretary is in support of this bill, here comes the BIR saying they are opposed to this bill," Drilon said.

"It appears the Senate is more interested in the passage of this measure," he said.

The Bangko Sentral said the FIST Act would help "encourage the sale of non-performing assets," which will allow banks and Filipinos to stay liquid during the global pandemic.

"The FIST Act will assist the financial system in performing its role of efficiently mobilizing savings and investments for the country's economic recovery, as well as its sustained growth and development," said Bangko Sentral Managing Director Lyn Javier.

"If we keep the non-performing assets in the balance sheets of banks, it will eat up a significant amount of capital as well," she said.

"This would constrain them from lending to other sectors of the economy," she said.

Investors compare the non-performing ratio of countries when choosing where to bring their money.

Javier said the Philippines' non-performing ratio is currently at 2.5 percent, close to the higher end of the 1.3 percent to 2.6 percent regional rate.

Based on the country's experience during the Asian financial crisis in the 90s, the Bangko Sentral said it expects around 30 percent of the P347.8-billion non-performing assets in the country to be sold to FIST corporations. 

The Senate panel suspended the discussion on the bill after agreeing that the BIR needs to send its high-ranking officials to give details about its projected losses due to FIST.

"They didn't attend and so even if we get some information from those agencies, we can't really be sure if those are official statements from the director of that agency, particularly the BIR," said committee chair Sen. Grace Poe,

"It would also be more comforting if a higher-level official from each department will do a presentation here and a commitment on what they're trying to do with this bill that they are proposing we prioritize," she said.