Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said on Tuesday that BSP’s pandemic support measures to help banks cope with COVID-19 lockdowns will stop as soon as the new Financial Institutions Strategic Transfer (FIST) Act is working fully.

The FIST Act (Republic Act No. 11523) took effect last February 18. It allowed banks to easily dispose of their non-performing assets via asset management companies to free up bank liquidity and to boost lending to critical sectors needed for economic recovery.

It will also reduce the banking sector’s average non-performing loan (NPL) ratio by 0.6 to 5.8 percentage points from 2021 to 2025, said Diokno. “Exposure to bad debts remains manageable,” he also said. As of end-June this year, gross NPL ratio was at 4.48 percent, a slight improvement from end-May’s 4.49 percent. Before the pandemic, NPL ratio was comfortable at the two percent level.

“The time-bound relief measures will be in place until such time that the new FIST Act, signed earlier this year, becomes fully operational,” said Diokno during the virtual Philippine economic briefing in Japan. He was assuring foreign investors of the local banking industry’s strength and resilience amid the pandemic.

Some of the BSP’s “swift, time-bound and targeted” regulatory and operational relief measures include the relaxation of the single borrower’s limit, the reduced credit risk weights of loans to micro, small and medium enterprises (MSME).

Bank reprieves during the pandemic also include the staggered booking of allowance for credit losses and the counting of MSME loans as compliance to the reserve requirement which has reached almost P200 billion as of end-July.

“BSP’s support measures, together with government’s pandemic response, have supported confidence and optimism in the banking industry,” said Diokno, citing the latest Banking Sector Outlook Survey which showed that banks are optimistic for the next two years, expecting double-digit increase in assets, net income, investments, deposits, and loans.

“Banking sector stability throughout the pandemic was also aided in part by BSP’s regulatory relief measures for banks and their customers,” said Diokno. As per the latest data, banks’ capital adequacy ratio at 17.4 percent is still well above the eight percent Bank for International Settlements minimum and the BSP’s 10 percent threshhold.

Diokno has always said that the banking sector continue to be resilient despite rising NPL ratio amid the COVID-19 pandemic.

He said banks have “kept the impact of the crisis manageable” with a healthy capital adequacy ratio while NPL ratio has also remained manageable and “far from levels seen in the aftermath of the Asian financial crisis.”