MANILA — Philippine President Rodrigo Duterte on Tuesday signed a law that would help the country’s banks offload soured loans through asset management companies to help speed up the process of cleaning up of their books.
The new law would help banks shrink their pile of bad loans and other non performing assets, officials said, allowing financial institutions to expand credit and help the pandemic-hit Philippine economy recover.
“The new law will help keep the banking system stable despite the effects of the COVID-19 pandemic,” Bangko Sentral ng Pilipinas Governor Benjamin Diokno said in a phone message.
To defray the costs of transferring bad loans to so-called Financial Institutions Strategic Transfer Corporations (FISTCs) that will manage distressed assets, the law provided tax incentives.
Philippine banks’ gross non-performing loan (NPL) ratio eased to 3.61% in December after rising for 11 consecutive months in 2020, central bank data showed, as firms struggled to cope with the pandemic.
From one of Asia’s fastest growing nations before the pandemic, the Philippines suffered its worst economic decline in 2020 as a strict coronavirus lockdown shuttered businesses and put millions out of work. ($1 = 48.1660 Philippine pesos) —Reporting by Karen Lema; Editing by Alison Williams