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Marcos pushes for liquidation of ‘toxic’ state assets to fund COVID-19 response

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Senator Imee Marcos has urged the Duterte administration to finally liquidate non-performing and “toxic” assets to raise more funds for the government’s response in the global coronavirus pandemic.

Marcos’ Senate Bill 1646 or the Financial Institutions Strategic Transfer Act has proposed to create specialized asset-managing corporations that will clean up the balance sheets of lending institutions by acquiring their bad loans and stagnant properties.

“Unpaid loans and other non-performing assets are the virus infecting the country’s financial system and will test its resilience in the coming months,” said Marcos, chair of the Senate committee on economic affairs.

Marcos warned that the COVID-19 pandemic will make it harder for borrowers to pay back and will likely increase the bulk of non-performing assets in government financial institutions, private banks, investment houses, and other credit-granting entities.

Similar to the special purpose vehicles (SPVs) created in the wake of the 1997 Asian financial crisis, the FIST corporations proposed in SB 1646 will specifically address the COVID-19 pandemic’s threat to the economy, according to Marcos

“The financial relief strategy back then was able to lower the ratio of bad loans to total loans from 14.6 percent in 2001 to 5.1 percent in 2005. Liquidity was created in the hundreds of billions,” said Marcos.

“Greater liquidity means banks and other financial institutions will be able to lend more to keep businesses in operation,” Marcos explained.

Marcos stressed that the national government needs more than the P140 billion that President Rodrigo Duterte’s economic managers have allotted for the government’s second stimulus package.

For Marcos, creating FIST corporations “will help government raise revenue to respond to the pandemic.”

Tax privileges and fee exemptions to be given to FIST corporations aim to encourage their creation at a time of increased financial risk.

Among banks alone, Marcos noted that the amount of non-performing loans may increase in the coming months from the present five percent to as high as 20 percent of total loans, as projected by the Bankers Association of the Philippines.

“While the government has so far managed to keep the peso steady against the dollar with a strong balance of payments and international reserves, how long will this last if local businesses and exports remain weak?” said Marcos.

“The spike in COVID-19 cases is shocking us each day and our hospitals are starting to fret about their capacities,” Marcos added, citing that UP researchers have just revised their case projection upward from 60,000 to 75,000 by the end of July.

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