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More banks are signaling their intention to sell NPAs

FREEPIK

By Luz Wendy T. Noble, Journalist

ANOTHER asset management company (AMC) has received regulatory approval to buy bad bank assets amid the pandemic.

This comes as more banks have expressed their intention to avail themselves of incentives under the Financial Institutions Strategic Transfer Act (FIST) as they seek to improve asset quality by shedding non-performing assets (NPA ).

Based on the latest Securities and Exchange Commission (SEC) directory, there were already six FIST (FISTC) companies as of March 24. PI One FISTC-AMC has been added to the list.

The finance department said there were five FISTCs in January, namely Philippine Equitable Recovery FIST-Asset Management Corp., Philippine Recovery Co. FISTC-AMC, Inc., Argo Global Servicing Philippines (FIST-AMC), Collectius FISTC-AMC Private. ltd. Corp., and Resurgent Capital (FISTC-AMC), Inc.

Republic Act 11523 or the FIST Act was signed into law in February of last year and enabled the creation of SEC-registered AMCs that can help banks clean up their balance sheets after uncollectible assets rise during the pandemic.

Assets that will be recognized as non-performing until December 31, 2022 may be sold under the law to FISTCs.

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Chuchi G. Fonacier said he received requests for validation of a master list of non-performing assets from 14 banks. This was higher than the 11 banks in January.

To date, the PASB has validated four banks Iffinal master list of eligible NPAs, while the others are still in various stages of evaluation, Ms. Fonacier said.

“Based on the latest simulation, the implementation of the FIST Act is expected to result in the disposal of NPAs consisting of non-performing loans (NPLs) of 157.2 billion pesos and real estate and other acquired assets of 49.2 billion pesos with an assumed cession rate of 30%, similar to that experienced during the 1997 Asian financial crisis, Ms. Fonacier said in a Viber message.

Ms. Fonacier says she has not yet received a request for issuance from CertiIfBSP-supervised eligibility category Iffinancial institutions on the transfer of NPAs under the FIST Act now.

“However, the submission of master list requests to the BSP by these banks meansIfes their intention to take advantage of the incentives under the said law, she said.

The certificate of eligibility of a financial institution seeking to sell NPAs will be provided to the SEC and the Bureau of Internal Revenue for tax incentive reference.

Among the big banks, Philippine National Bank (PNB) and Rizal Commercial Banking Corp. (RCBC) said they wanted to sell NPAs through the FIST Act.

“We are considering offloading retail and business loans that are not sensitive to the normal collection process and these will take too long to collect,” PNB said in an email to Business world.

“RCBC is looking to offload some of its assets through the FIST Act as we would like to take advantage of investors’ increased appetite to invest in distressed assets, given the tax incentives they may enjoy,” said said the Yuchengco-led lender. in an email.

When questioned, BDO Unibank, Inc. and Metropolitan Bank & Trust Co. said they did not wish to exploit the provisions of the FIST Act.

The latest data from the BSP showed that the banking sector’s NPL ratio hit a three-month high of 4.24% in February. Bad debts increased by 2.38% to reach 472.774 billion pesos compared to the previous year.

During the pandemic, the NPL ratio reached a 13-year high of 4.51% from July to August 2021, which is still well below the 17.6% seen in the aftermath of the Asian financial crisis in 2002.