MANILA, Feb. 16 (Reuters) – Philippine President Rodrigo Duterte on Tuesday signed a law that would help the country’s banks get rid of bad credit loans through asset management companies in order to speed up the process of cleaning their books.
The new law would help banks reduce their stack of bad debt and other non-performing assets, officials said, allowing financial institutions to extend credit and help the pandemic-stricken Philippine economy recover .
“The new law will help maintain the stability of the banking system despite the effects of the COVID-19 pandemic,” Bangko Sentral ng Pilipinas Governor Benjamin Diokno said in a telephone message.
To cover the costs of transferring bad debts to strategic financial institution transfer companies (FISTCs) that will manage distressed assets, the law provides for tax incentives.
The gross non-performing loan (NPL) ratio of Philippine banks fell to 3.61% in December after rising for 11 consecutive months in 2020, according to central bank data, as businesses struggled to cope with the pandemic.
Coming from one of the fastest growing countries in Asia before the pandemic, the Philippines suffered its worst economic decline in 2020 as a strict coronavirus lockdown closed businesses and put millions of people out of work . ($ 1 = 48.1660 Philippine pesos) (Reporting by Karen Lema; Editing by Alison Williams)