TO STRENGTHEN FINANCIAL SECTOR: FIST to forego P58B revenues

    1641

    The government is willing to forego as much as P58.49 billion in projected revenues over the next five years to clear the banks’ books, and to keep the economy going, if the proposal which seeks to strengthen the financial sector is passed into law.

    Carlos Dominguez, Department of Finance secretary, called on Congress to act fast in approving the proposed Financial Institutions Strategic Transfer (FIST) Act which, he said, will protect the financial sector from any lasting damage from the unprecedented economic crisis brought by the new coronavirus, by guaranteeing a steady source of credit for the pandemic-hit sectors of the economy while providing safeguards to consumers.

    The FIST Act allows banks to outsource the management of their non-performing assets to asset management companies which will enable them to focus on their primary task of lending to sectors in need of credit, Dominguez said.

    “By keeping non-performing assets contained and managed, FIST will expand the amount of risk banks can take. This benefit cannot be understated in a crisis, when lending to businesses is riskier but also more urgently needed,” he said during the virtual joint hearing on the FIST bill conducted by the Senate committees on banks, financial institutions and currencies, and on ways and means.

    The measure provides tax incentives to defray the transaction and transfer costs of non-performing assets to asset management companies.

    Dominguez said this would entail foregone revenues of between P3.3 billion to P13 billion every year for the next five years to clear the books of banks of bad debts, and to keep the economy going.

    In his presentation yesterday, under a scenario where 54 percent of real and other properties acquired will be transferred at 35 percent discount, of which 25 percent will avail of tax benefits, the government is projected to forego P14.62 billion in revenues over the next five years.

    Meanwhile, if all will avail of tax benefits, the estimated foregone revenue will be P58.49 billion from 2021 to 2025.

    “We believe that the economic benefits of strengthening the financial sector through this effort outweigh the fiscal costs of doing so,” Dominguez said.

    The FIST bill was among the priority measures that President Duterte urged the Congress during his 5th State-of-the-Nation Address last July 27 to act on quickly as part of the government’s economic recovery program.

    The House of Representatives had already passed its version of the FIST bill on third and final reading before the sine die adjournment of the Congress in June.

    “Enacting FIST will fortify the financial sector and keep it strong and stable for the difficult task of rebuilding our economy,” Dominguez said.

    He added the FIST Act is an “improved version” of the old Special Purpose Vehicle (SPV) law, and will help the financial system mobilize credit for the productive segments of the economy.

    He recalled that to stem the damage to the economy of the 1997 Asian financial crisis that lasted till the early 2000s, a similar measure, the SPV Act of 2002, was passed by Congress but was enacted only five years later when most distressed businesses had already recovered and able to meet their financial obligations.

    Had the SPV law been available earlier at that time, the local banks could have helped businesses recover faster, Dominguez told senators.

    “This time, we are acting swiftly and proactively while our banks’ asset quality is still relatively solid. Financial institutions also need time to learn how to use these instruments.

    Your Honors, now is the time to act. Fireproofing, after all, is best done before the fire,” Dominguez said.

    FIST will also encourage the private sector, government financial institutions and government-owned or -controlled corporations to help rehabilitate distressed businesses, Dominguez said.