CMEPA and the 20% tax: What it means for your bank savings

Netizens were in an uproar when banks implemented new tax rates on savings interest, prompting many to ask: “What’s going to happen to my savings?”

The changes stem from the Capital Markets Efficiency Promotion Act (CMEPA), a new law signed by President Ferdinand Marcos Jr. in May and enacted in July. It aims to introduce key reforms to level the playing field in trade and investment. One such reform is the reduction of the Stock Transaction Tax (STT) from 0.6% to 0.1%.

However, what triggered the uproar is the uniform 20% tax rate on interest income.

The Department of Finance (DOF) has since clarified misconceptions fueled by social media buzz, especially the mistaken belief that people’s actual bank savings are being taxed 20%.

In reality, it’s not the money in your account being taxed, but the interest it earns while sitting in the bank. The DOF also emphasized that this is not a new tax, but an existing one that has now been standardized under CMEPA.

“1998 pa lang, may 20% tax na ang interest na kinikita ng ating mga karaniwang deposito sa bangko,” the DOF said in a Facebook post. 

(As early as 1998, there was already a 20% tax on our interest being made by ordinary deposits in the bank.) 

The DOF summarized the new tax rates as follows: 

CMEPA and the 20% tax: What it means for your bank savings

The DOF argued that the old system favored those who are richer, as their studies showed that they are the ones holding long-term deposits (TD). 

Rizal Commercial Banking Corp. chief economist Michael Ricafort told Philstar.com that the impact will likely be felt more by those with Foreign Currency Deposit Unit (FCDU) accounts and US dollar time deposits.

“TD amounts become bigger, in terms of the larger interest income generated and now the higher 20% withholding tax that these are subjected to since July 1, 2025,” he said. 

“But for smaller amounts, the changes could be minimal/negligible,” Ricafort said. 

What can the public gain from the CMEPA?

While the CMEPA would certainly make the Philippines more appealing to investors after the lowering of several investment taxes, how could it help the common Filipino who wants to simply earn money? 

The DOF argued that the CMEPA would encourage ordinary Filipinos to invest and diversify their income sources. Other than the reduction of the STT, the CMEPA also decreased the documentary stamp taxes (DST) rate from 1% to 0.75%, as well as removing it completely from the collective investment schemes. 

“These measures are seen to cut transaction costs, encourage market participation and financial planning, boost market liquidity, make the country’s equities market regionally competitive, and increase capital market growth,” the DOF said in a statement. 

Ricafort agreed with the DOF, saying that local investors would have more choices in diversifying their investments with hopes of generating more returns.

While the CMEPA may ease investment, the question of whether or not the average Filipino is willing to invest their money in the current economic environment remains, especially amid inflation and global uncertainties. 

Ricafort said that now is still a conducive time for investing. 

“Bond yields near cycle/multi-year highs that are favorable for investors,” he said. 

What can the public do to mitigate CMEPA’s impact? 

While smaller savings accounts may not feel the effects of the CMEPA, some have raised that middle-class earners who wish to save more money in the long run are more likely to feel the effects of the CMEPA. 

Ricafort advised that they could seek alternative means to save or invest their money. He said that savers could try out a Personal Equity and Retirement Account (PERA). A PERA account is a voluntary retirement savings account that could supplement your SSS. 

Investment is also an option, but Ricafort warned newcomers to be cautious.

“This is investment related, not deposits, that are subject to market conditions or higher risk-higher return trade off as a source of diversification,” Ricafort said. 

Source: Philstar

Philippine banks’ real estate exposure sinks to 6-year low

The exposure of Philippine banks and trust entities to the property sector dropped to a six-year low at the end of March, data from the Bangko Sentral ng Pilipinas (BSP) reported.

Banks’ real estate exposure ratio slipped to 19.41% as of end-March from 19.75% at end-December. It was also lower than 20.31% in the same period last year.

This was also the lowest real estate exposure ratio recorded in six years or since the 19.2% at end-March 2019.

The BSP monitors lenders’ exposure to the real estate industry as part of its mandate to maintain financial stability.

Investments and loans extended by Philippine banks and trust departments to the real estate sector rose by 7.76% to P3.34 trillion as of March from P3.1 trillion in the same period in 2024.

Broken down, real estate loans increased by 9.1% to P2.97 trillion as of end-March from P2.72 trillion at end-March 2024.

Residential real estate loans increased by an annual 11% to P1.13 trillion, while commercial real estate loans also went up by an annual 7.96% to P1.83 trillion.

Past due real estate loans stood at P149.52 billion, higher by 9.3% from P136.79 billion a year prior.

Broken down, past due residential real estate loans climbed by 14.74% to P107.62 billion, while past due commercial real estate loans fell by 2.56% to P41.9 billion.

Gross nonperforming real estate loans inched up by 0.44% to P111.27 billion at end-March from P110.79 billion a year ago.

This brought the gross nonperforming real estate loan ratio to 3.75% at end-March, lower than 4.07% a year earlier.

Meanwhile, real estate investments also dipped by 1.86% to P372.4 billion as of end-March from P379.45 billion in the same period a year ago.

Debt securities increased by 1.93% year on year to P256.04 billion, while equity securities fell by 9.28% to P116.36 billion.

Joey Roi H. Bondoc, director and head of research at Colliers Philippines attributed the banks’ lower exposure ratio in the first quarter to the drop in consumer demand for housing loans.

In a phone interview, Mr. Bondoc said there have been reports that homebuyers are backing out of their loans.

“Once it enters the bank financing, [the payment] balloons to, say, quadruple, quintuple times. That’s the problem,” he said, noting that some buyers may have been attracted by the low downpayment.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said real estate developers may also be cautious in managing new supply after the exit of Philippine offshore gaming operators.

“Banks, real estate companies, investors, end-users also cautious on possible slower world and local economic conditions due to Trump’s higher tariffs/trade wars/other protectionist policies and geopolitical risks recently such as the Israel-Iran war,” Mr. Ricafort said.

Mr. Bondoc said he sees some “green shoots of recovery, but those are primarily outside of Metro Manila.”

“The horizontal house and lot projects are still good. But, again, the more expensive projects, say those in Metro Manila, including the condos, the take-up is definitely down,” he said.

Recent rate cuts by the BSP may not have been felt by consumers.

“We’ve seen these reductions already from the central bank since last year. But have we seen an impact, a positive impact, meaning reduced mortgage rates? Not yet. We have not seen that,” Mr. Bondoc said.

On Thursday, the BSP delivered a second straight 25-basis-point (bp) cut, bringing its policy rate to 5.25% amid a benign inflation outlook and slowing economic growth.

It has now reduced benchmark borrowing costs by 125 bps since it began its easing cycle in August last year.

“Our average rate, for example, five-year loans, still at 7.7%. When last year, it was 7.8%. There’s really no sizable, substantial correction or reduction in terms of these mortgage rates,” Mr. Bondoc said.

BSP Governor Eli M. Remolona, Jr. also signaled they could deliver one more 25-bp cut this year.

Source: Business World

Licenses, registrations of 401 lending firms canceled – SEC

The Securities and Exchange Commission (SEC) on Monday said that it had canceled the registrations and licenses of 401 lending companies over their failure to comply with reportorial requirements.

The revocation order was issued last May 30 by the corporate regulator's Financing and Lending Companies Department.

"The subject companies were found to have failed to file their audited financial statements, general information sheet, director or trustee compensation report, and director or trustee appraisal or performance report and the standards or criteria for the assessment," the SEC said in a statement.

All companies had failed to file the required reports at least three times over a five-year period and were declared delinquent after ignoring an October 2023 notice to avail of an amnesty.

Delinquent firms were given another six months to comply but all respondents again failed to do so, the SEC said.

Under SEC Memorandum Circular 19, series of 2023, failure to comply within six months from the receipt of the order of delinquency authorizes the commission to revoke corporate registrations.

The list of lending companies that had their primary and secondary licenses revoked can be accessed at https://www.sec.gov.ph/wp-content/uploads/2025/06/2025Advisories_401-Delinquent-Lending-Companies_Order.pdf.

Source: Manila Times