Banks' NPL ratio to remain in single digit until 2022: Diokno

By Joann Villanueva

September 22, 2021, 7:23 pm

<p>BSP Governor Benjamin Diokno <em>(file photo)</em></p>

BSP Governor Benjamin Diokno (file photo)

MANILA – Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno is confident that the proportion of non-performing loans (NPLs) of Philippine banks to total loans will remain in single-digit until next year despite the rising soured loans due to the pandemic.  
In a briefing streamed through the central bank’s Facebook page on Wednesday, Diokno attributed the projected single-digit NPL ratio to “banks prudent credit risk management standards, and the operationalization of the Financial Institutions Strategic Transfer or FIST Act.” 
“We estimate that the NPL ratio is likely to pick at 8.2 percent in 2022, which is twice the current NPL ratio, but it will decline in the years thereafter,” he said.
Diokno said the projected level of NPLs until next year “is significantly lower than that experienced by the banking system during the Asian financial crisis.” 
BSP data show that as of end-July this year, NPL ratio increased to 4.5 percent year-on-year, and the NPL coverage ratio stood at 82.4 percent. 
“We believe that loan quality will remain manageable as both BSP and the banks project the banking sector’s non-performing loan ratio to settle between 5 percent and 6 percent by end-December 2021,” Diokno said in his presentation. 
He said the operationalization of the FIST Act “will provide banks with a stand-by facility to offload their non-performing assets in case these post a sharp increase.”
FIST Act, or Republic Act 11523, was signed into law on Feb. 16, 2021. 
It is aimed to help financial institutions manage their non-performing assets (NPAs) by encouraging the private sector to manage, collect, and dispose of these assets and help rehabilitate distressed banks. 
Diokno said some banks have indicated an interest in disposing of their NPAs under this law. 
“They are just awaiting advice from the Securities and Exchange Commission as regards to FIST corporations, which SEC has (a) rule for establishment,” he added. (PNA)