Congress has ratified the bicameral conference committee report on the bill allowing financial institutions to sell off their non-performing assets (NPAs) to asset management companies, as these are expected to increase during the coronavirus pandemic.

House Bill No. 6816 and Senate Bill No. 1849, or the Financial Institutions Strategic Transfer Act, is one of the measures certified as urgent by President Rodrigo R. Duterte to assist financial institutions affected by the coronavirus pandemic.

The proposed legislation covers lending companies and other institutions licensed by the Bangko Sentral ng Pilipinas to perform credit-granting companies.

The Senate ratified the report on Tuesday while the House gave its approval on Wednesday. This puts the measure a step away from enactment.

Senator Grace S. Poe-Llamanzares said the measure will keep banks and lending firms healthy, allowing them to extend assistance to businesses.

“The FIST Act is seen to help cushion the adverse impact of the pandemic to our financial sector,” she said during Tuesday’s session.

“If passed into law, financial institutions will be able to offload non-performing assets which will then promote investor and depositor confidence, and mitigate the effects of the crisis.”

The measure provides for the creation of FIST corporations, which will be authorized to invest or acquire nonperforming assets (NPA), or engage third parties for its management, operation, collection and disposal.

The reconciled version of the House and Senate bills noted that only the private sector may be allowed to form FIST corporations.

“It would be financially risky for the government to be involved in acquiring non-performing assets as government revenue is down due to the pandemic,” Ms. Poe-Llamanzares said.

It also prevents foreign FIST corporations from taking part in the bidding and foreclosure of real properties. It also removed the consultation requirement with the Philippine Competition Commission.

“Specific periods were lowered to prevent delay in offloading of assets,” she added. “In the old SPV (Special Purpose Vehicle) law, banks found it difficult to immediately offload non-performing assets due to long settlement periods between the borrower and the bank, as well as due cases being filed in court.”

The proposed FIST Act is an improved version of the SPV Law of 2002, enacted to help banks recover in the wake of the Asian Financial Crisis. — Charmaine A. Tadalan and Kyle Aristophere T. Atienza