Senate OKs bill on financial institutions strategic transfer

Published December 15, 2020, 4:37 PM

by Vanne Elaine Terrazola

The Senate ratified on Tuesday the proposed Financial Institutions Strategic Transfer or the FIST Act. 


Senator Grace Poe, chairperson of the Senate banks committee, reported to her colleagues the bicameral conference committee report on the disagreeing provisions of the FIST bills approved by the Senate and the House of Representatives.

The bill, if signed into law, would allow banks and other financial institutions to dispose of their non-performing loans and assets in anticipation of the increase in such items following the pandemic.

Government economic managers earlier said this would help the banks free up money and capital to extend more credit, especially to small businesses.

President Duterte had certified the proposed legislation as urgent as part of his administration’s COVID-19 response and recovery measure.

Poe said the House adopted most of the provisions of the Senate’s version and settled only “major conflicting” parts of the measure.

Among the provisions agreed upon by the Senate and House panels, according to Poe, was to allow only the private sector to form FIST corporations.

She said “it would be financially risky for government to be involved in acquiring non-performing assets as government revenue is down due to the pandemic.”

Also, foreign FIST corporation shall not be allowed to take part in the bidding and foreclosure of real properties. 

The House version, Poe said, gave option for foreign FIST corporation to easily pay off the penalty in case they are unable to transfer the property after five years. 

“This might result in perpetual ownership of land which is in violation of Republic Act 7042 or the Foreign Investments Act. Thus, we deleted the provision,” she said.

Poe said the bicam members agreed to lower the period for considering loans and other financial assets as non-performing loans (NPLs) from the original proposal of 180 days to 90 days to prevent delay in offloading of assets.

She note that under the previous Special Purpose Vehicle (SPV) Act, “banks found it difficult to immediately offload non-performing assets due to long settlement period between the borrower and the bank, as well as due cases being filed in court.”

They also agreed to retain the borrower’s right to renegotiate loans as we recognize the need to also assist borrowers, but lowered the period of restructuring from 90 days to 30 days. 

“Together, this gives the borrower at least 120 days to pay off or renegotiate a loan and prevent the transfer of the asset to a FIST corporation,” Poe said.

Poe said the final FIST bill would also extend the applicability period to assets that have become non-performing from Dec. 31, 2020 to Dec. 31, 2022, noting that that NPLs build over time. 

The bicam panel also deleted the provision requiring prior consultation with the Philippine Competition Commission before an asset is transferred. The bicam “saw this as another administrative layer that may cause delay,” Poe said. 

Lawmakers also removed from the bill the provision reiterating the investigative powers of Securities and Exchange Commissioin and the Department of Justice over violation complaints on the Anti-Dummy Law in relation to FIST transactions to remove apprehension among investors.

“To prevent delay in the implementation as what happened in the old SPV law and to respond to the need to immediately enact the bill, the panel agreed to adopt the Senate proviso that the non-promulgation of the IRR shall not prevent the implementation of this Act upon its effectivity,” Poe said.

Poe said the proposed FIST law will to mitigate the impacts of the COVID-19 pandemic to the country’s financial sector and promote investor and depositor confidence.

“If our financial institutions are in good shape, they can help businesses and save jobs in return,” she continued.