Banks welcome passage of Fist bill

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CEBU banks on Thursday, Feb. 18, 2021, welcomed the signing into law of the Financial Institutions Strategic Transfer (Fist) Act that seeks to help banks and financial institutions dispose of non-performing assets (NPAs) brought about by the Covid-19 pandemic.

Romeo Comabig, president of the Cebu Bankers Club, told SunStar Cebu that the law would help banks remain stable during these tough times.

“The signing into law of the Fist Act is a very much welcome development of the Cebu Bankers Club. Now that the Bayanihan Acts were already passed, banks are now in the process of updating collections and remedies. Because of the economic slowdown, we expect an increase in the NPAs, which would put the financial position of the bank to be unstable if not disposed of earlier,” he said.

Comabig said banks and other financial institutions could now easily dispose of NPAs through a third party, thus maintaining liquidity of the banks’ financial position. The law also encourages private sector investment in the NPAs.

The CBC president explained that a bank considers the loans it gives out as part of its assets.

“If this becomes past due, this becomes non-earning already and is a big drag on the financial position of the bank. The sooner this is disposed of, the better for the bank,” he said.

A non-earning asset is an NPA, he said.

Comabig gave the scenario of a bank or financial institution lending out to people with a capital of P10 million, of which P7 million of the loan is already past due.

“Your income will depend only on the remaining P3 million, right? So you would rather sell the P7 million to a third party at a discount, say P5 million, so that you can roll the P5 million and regain your P2 million loss. That’s the essence of the Fist Act,” he said.

BAP statement

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