Earlier this year, FIST Bill or the Financial Institutions Strategic Transfer (FIST) Act proposed as House Bill (HB) No. 6816, seeks to ensure that banks and financial institutions (FIs) are able to maintain their financial health to cushion the adverse economic impact of COVID-19. The new measure provides the necessary options in order to expedite and provide the rehabilitation of distressed companies.
The State recognizes the role of banks and other financial institutions as mobilizers of savings and investments and in providing the needed financial system liquidity to keep the economy afloat. This allows banks to dispose of non-performing loans and assets (NPAs) in order to resolve their debts.
FIST BILL SALIENT FEATURES:
- To develop and maintain a sound financial sector for the country;
- To address the non-performing asset problems of the financial sector;
- To encourage public and private sector investments in non-performing assets;
- To eliminate existing barriers in the acquisitions of non-performing assets;
- To help in the rehabilitation of distressed business with the end in view of their becoming economic value-added contributors; and
- To improve the liquidity of the financial system which can be harnessed to the proper economic growth and maintain financial stability.
FINANCIAL INSTITUTION or FI’s means credit-granting institutions which shall be limited to the following:
- The Bangko Sentral ng Pilipinas (BSP)
- A bank, as defined under Republic Act No. 8791, also known as General Banking Law of 2000”;
- A financial company, as defined under Republic Act No. 8556, also known as Financing Company Act of 1998”;
- An investment house, as defined in Presidential Decree No. 129, also known as “The Investment House Law’;
- A lending company as defined under the Republic Act No. 9474, also known as Lending Company Regulation Act of 2007”;
- Government financial institution (GFI’s) which for purposes of this Act, refers to the Philippine Deposit Insurance Corporation (PDIC), Land Bank of the Philippines(LBP) and Development Bank of the Philippines (DBP), and such other GFIs as may be included by Secretary of Finance;
- Government owned-or controlled corporations (GOCCs) which for the purpose of this Act, refers to the National Home Mortgage Finance Development (NHMFC), Philippine Guarantee Corporation (PGC), Home Development Mutual Fund (HDMF), Social Security System (SSS), Government Service Insurance System (GSIS), Small Business Corporation (SBC), National Housing Authority (NHA), and such other GOCCs as may be included by the Secretary of Finance; and
- Other institutions licensed by the BSP to perform (i) quasi-banking functions and (ii) credit-granting activities, including non-stock savings and loan associations, pawnshops, and non-bank credit card issuers.
FISTC will be a stock corporation and shall be organized in accordance with the rules promulgated by the Securities and Exchange Commission for the purpose of registering the FISTC 60% of its outstanding capital stocks shall be owned by Philippine nationals in line with Republic Act No. 7042, otherwise known as the “Foreign Investment Act.”
Powers of FISTC:
- Invest in or acquire NPAs or FIs;
- Engage third parties to manage, operate, collect and dispose of NPAs acquired from an FI;
- Rent, lease, hire, subject to a security interest, mortgage, transfer, sell, exchange, usufruct, secure, securitize, collecting rents and profits, and other similar acts.
- In case of NPLs, to restructure debt, condone debt and undertake other restructuring related activities.
- Buy or transfer shares issued by the borrower for the purpose of business reorganization or rehabilitation of the borrower, subject to the provisions of the Revised Corporation Code of the Philippines in respect to the rights of the shareholders of the borrower company, and apply other measures or restructuring techniques with the approval of the Commission;
- Enter into dation in payment arrangements, foreclosure judicially or extra-judicially and other forms of debt settlement involving NPLs;
- Spend funds to renovate, improve, complete or alter its NPAs acquired from an FI;
- Issue equity or participation certificated or other forms of Investment Unit Instrument (IUI) for the purpose of acquiring, managing, improving, and disposing of its NPAs acquired from an FI.
- Borrow money and issue other instruments of indebtedness for the purpose of paying operational and administrative costs.
- Guarantee credit and accept intervene or honor the bills of borrowers;
- Advance funds to borrowers as may be acquired for an acquired assets or any debt restructuring agreement pursuant thereto, or under any court or rehabilitation plan; and
- Engage the services of a third-party asset servicing company for the collection and receipt of the debt payments for the debts under debt restructuring or business reorganization, management, and disposition of assets of the FISTC in accordance with the rules, procedures, and conditions prescribed by the Commission by the courts.
FIST bill aims to create specialized assets, managing firms, or corporations. The agency or institution shall be known as Financial Institutions Strategic Transfer Corporation (FISTC) that would acquire “bad loans assets and stagnant properties from distressed financial institutions for micro, small and medium enterprises.
Due to the pandemic, we are forced to protect various sectors specifically the financial sector so that economic recovery will be faster, and with more lasting positive effects. The Act provides tax incentives for the transfer of non-performing assets (NPAs) to and from these FISTCs.