Financial reform

The Senate through the Committee on Banks and Financial Institutions, which I chair, saw major financial reform laws passed that will ease up the flow of credit and the build up of the capital market.

First, the Lending Companies Act which will create a regulatory framework for lending companies, was passed by both the Senate and the House, and is now ready to be signed into law.

Second, the Credit Information System Act, which will provide complete and comprehensive credit information on borrowers, was passed by both Houses and its bicameral report is pending for ratification. Its greatest benefit is making credit more available, especially to small yet responsible borrowers. Not only will it lower the cost of credit and reduce the reliance on physical collateral to secure credit, but it will also give lending institutions access to reliable credit information to help them manage credit risks better.

Third, the Personal Equity and Retirement Account (PERA) has been passed by the Senate on 3rd reading and by the House on 2nd. PERA could become one of the most effective means of mobilizing savings for long term growth. It will supplement the existing government-sponsored pension scheme by setting up a privately funded retirement fund. It allows private individuals to set aside P50,000 a year, withdrawable when the contributor reaches the age of 55, and tax-exempt. It will be especially helpful to OFWs and owners of small businesses who are not covered by any government-mandated pension scheme.

Other equally important financial reforms for the next Congress include: the Pre-Need Code which will establish rules to govern the operations of pre-need firms and provide protection to consumers; the Corporate Recovery Act which seeks to improve the insolvency procedures to make the debt recovery process more efficient; the Revised Investment Company Act (RICA) which will enable investment companies to play a key role in capital formation, and extend consumer protection as well; amending the BSP Charter to better oversee the banking system; and modernizing the Insurance Code.

We hope introduce in the next Congress the Real Estate Investment Trust (REIT), a financial instrument which will provide liquidity to the real estate market, and raise close to US $3 billion from real estate in the country.

Together, all these reform laws should reinforce the banking and financial sectors, thereby sustain the momentum for rising investment and growth.