5 FIST corporations now set up—DOF


The Securities and Exchange Commission (SEC) has approved five corporations that will acquire the bad loans and non-performing assets (NPAs) of financial institutions affected by the pandemic-induced crisis, the Department of Finance (DOF) said.

In a statement, the DOF said that five Financial Institutions Strategic Transfer Corporations (FISTCs) have already been established Wednesday, Jan. 19, two of which are Filipino-owned while the rest include the participation of Japanese and Swiss investors.

The two 100 percent Filipino owned FISTCs registered with the SEC are the Philippine Equitable Recovery FIST-Asset Management Corporation (AMC) and Philippine Recovery Company FISTC- AMC, Inc.

Others are Argo Global Servicing Philippines (FIST-AMC) Inc. owned by the Japanese-firm Argo Global Investment Co., LTD, and Collectius FISTC-AMC Private Limited Corp., a wholly owned firm by Switzerland-based Collectius 2 AG.

The last FISTC is Resurgent Capital (FISTC-AMC) Inc., which has China Bank Capital Corp., a domestically registered investment banking subsidiary of China Banking Corp., among the incorporators.

The five FISTCs will enable banks and other credit-granting institutions to efficiently offload bad loans and NPAs that they may have accumulated during the pandemic, the DOF said.

Mandated by Republic Act (RA) No. 11523 or FIST law, a FISTC is a stock corporation that shall have a minimum authorized capital stock of P500 million, a minimum subscribed capital of P125 million, and a minimum paid-up capital of P31.25 million.

However, a FISTC cannot be a one-person corporation.

“Where land and foreign equity participation are concerned, a FISTC shall comply with the provisions of the Constitution and the minimum capital requirements under the Foreign Investments Act (FIA),” the DOF said.

To encourage FISTCs to acquire the financial institutions’ soured loans and NPAs, the new law provides for tax exemptions and lower fees on certain FIST-related transactions.

“By helping banks and other financial institutions keep their lending operations strong, the measure also aims to assist about 600,000 micro, small and medium enterprises (MSMEs) in continuing their operations and retaining around 3.5 million jobs as they struggle through the pandemic,” the DOF said.

Under the law and its implementing rules and regulations (IRR), the SEC is tasked with approving the establishment of FISTCs and the reconfirmation of existing special purpose vehicles (SPVs) as FISTCs.

The SEC is also tasked to monitor the operations of FISTCs as well as review and approve the issuance of their Investment Unit Instruments (IUIs).

These IUIs refer to participation certificates, debt instruments, or similar instruments issued by the FISTC and subscribed by Qualified investors.

During informal discussions with the banking sector, the SEC said it found out that the slow rollout of FISTCs could be attributed to the continuing strength of the Philippine banking system despite the pandemic.

The SEC estimates the current non-performing loan (NPL) ratio for Philippine banks at 4.43 percent as of Nov. 12, 2021, which is less than double the pre-pandemic NPL levels and much less than the ratio during the Asian financial crisis.

“Unlike during the Asian (financial) crisis, in general, Philippine banks remain well-capitalized and liquid. Hence, there is less pressure for banks to liquidate NPLs or NPAs for cash,” the SEC said.

The SEC also pointed out that during the Asian financial crisis, most of the proponents of SPVs were foreign funds that were interested in opportunities to invest in distressed Asian debt, including the NPLs/NPAs of Philippine banks.

But during this pandemic, the crisis was global in scope, so foreign investors need not go far from their home jurisdictions to invest in distressed debt.

Instead of focusing on banks, the SEC said the FISTCs may need to turn their attention to other Philippine credit granting institutions, such as financing, lending and microfinance companies.

The SEC said it plans to discuss this concern with the Investment Houses Association of the Philippines (IHAP) and the Philippine Finance Association (PFA).