Palace certifies 3 bills boosting FI power
THE Palace has certified as urgent three bills further assisting financial institutions, which are tasked to help critical industries adversely affected by the Covid-19 pandemic.
During a briefing, House Committee on Banks and Financial Intermediaries
Chairman Junie Cua listed the measures—amendments to Agri-agra Reform Act, the Financial Institutions Strategic (FIST) bill, the Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery (GUIDE) bills—as having been Palace-certified in order to fast-track their approval in Congress.
The House has already approved on third and final reading the proposed amendments to Agri-agra Reform Act and the Financial Institutions Strategic bill. These two bills are now pending in the Senate.
“For the information of the committee, three of our five bills were certified as urgent because they are forming part of the total [economic] stimulus package of the government,” Cua said.
According to Cua, the House will prioritize passage of the GUIDE bill when session resumes next week.
BSP backing
DURING the pre-sona forum, Bangko Sentral ng Pilipinas (BSP)
Governor Benjamin E. Diokno said that, while there are initiatives to mitigate the impact of Covid-19, the BSP continues to push for the passage of several legislative priorities and measures. Among these measures are the FIST and GUIDE bills.
The FIST bill aims to help financial institutions in their bad debt resolution and in the management of their non-performing assets (NPAS) in order to cushion the adverse impact of the Covid-19 pandemic on their financial operations. The NPAS consist of the financial institutions’ non-performing loans (NPLS) and real and other properties acquired (ROPAS) in settlement of loans and receivables.
The bill encourages 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 GUIDE bill, meanwhile, seeks to strengthen the capacity of the government financial institutions, including Philippine Guarantee Corp., the Land Bank of the Philippines, and the Development Bank of the Philippines in order to provide the needed assistance to micro, small and medium enterprises and other strategically important companies.
Moreover, Cua said the amendments to the Agri-agra law will make it easier for banks to pump up fresh capital to the farm sector.
“Agri-agra law, which was legislated with a very good and noble intention, requires banking institutions to set aside a credit quota to lend out agricultural sector and agrarian reform beneficiaries. But unfortunately, banks preferred to be penalized instead of lending to small farmers and to agrarian reform beneficiaries,” he said.
Based on their study, Cua said, the more important reason banks are unable to lend out is their view that small farmers, “if they are not organized…are not only poor credit risk, their ability to repay is [also] very low.”
And, “instead of lending to one organization ,you need to deal with 1,000 people [who are] borrowing P25,000, so the cost of lending is very high,” he added.
According to Cua, “if we can only ensure that the banking industry can ‘productively comply,’ meaning they will not be afraid to lend because they know the organized farmers will be able to repay, then those credit quota is definitely sufficient to address the needs of the agricultural sector.”
For his part, Manila Teachers Rep. Virgilio Lacson asked the BSP to be stringent with the Agri-agra law to stimulate the economy immediately.
According to Lacson, the compliance rate of all banks with Agriagra Law is very low.
The Agri-agra Reform Credit Act of 2009 (Republic Act 10000) mandates banks to allot at least 10 percent of total loanable funds for agrarian reform beneficiaries (ARBS) and 15 percent for farmers and fisherfolk. Under the amendatory bill now under congressional scrutiny, the required allotment for agrarian reform beneficiaries and agriculture will be merged to a whole 25 percent, with no delineation as to what percentage is needed for agrarian reform and for agriculture.