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Financial sector resiliency versus COVID-19 bill hurdles House panel

May 30, 2020 - Saturday 6:05 PM by PNA

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MANILA – A bill seeking to strengthen the financial sector by helping banks and other financial institutions withstand the economic downturn due to the coronavirus disease (COVID-19) pandemic hurdled committee level at the House of Representatives.

The House Defeat COVID-19 Committee (DCC) approved the Financial Institutions Strategic Transfer bill, which aims to help financial institutions in their bad debt resolution and management of their non-performing assets (NPAs) to mitigate the economic impact of the pandemic on their operations.

House committee on banks and financial intermediaries chairman Junie Cua said most financial institutions are facing a period of delayed loan collections and are at risk of recording higher NPAs across all borrower segments as a result of the disruption in economic activities.

NPAs are financial institutions' non-performing loans (NPLs) and real and other properties acquired (ROPAs) in settlement of loans and receivables, which prevent banks and financial institutions from effectively performing their role of financial intermediation.

“Now, the concern of the banking industry is the inevitable increase on their non-performing loans or their non-performing assets. This is inevitable because as everybody would expect because of the closing of businesses as a result of the ECQ (enhanced community quarantine),” Cua said.

Cua said it is not hard to imagine that the increase in the NPLs and NPAs would affect the liquidity of the banking industry.

“It will affect its resiliency or profitability. And it could affect its very viability,” he added.

He said the proposed measure would help banks and other financial institutions offload their NPAs, induce economic activity, and improve the liquidity of the financial system to propel economic growth.

The bill seeks to encourage financial Institutions to sell NPAs to asset management companies, created as Financial Institutions Strategic Transfer Corporations (FISTC), that specialize in the resolution of distressed assets.

“The banking sector must continue to provide credit. It has to be liquid all the time to be able to meet the continuous flow of credit to the economy, the very lifeblood of economic activity,” Cua said. “This bill therefore intends to set up the mechanism and the legal framework to address these concerns. This will enable the banks to dispose their non-performing loans and assets and become more liquid.”

The DCC also approved a substitute bill prohibiting the discrimination against persons who are declared confirmed, suspect, probable, and recovered cases of COVID-19, as well as healthcare workers and service providers.

The bill seeks to grant full, inviolable protection against prejudice and discrimination to those who have already suffered and recovered from COVID-19, those who carry the brunt providing medical care, logistical and service support.

It also seeks to recognize the dignity and heroism of the work of health workers, responders and service workers. PNA

 

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