Senate approves FIST bill

By Charmaine A. Tadalan, Reporter

THE SENATE on Tuesday approved a measure allowing financial institutions to offload bad loans to asset management companies in order to cushion the impact of the coronavirus pandemic on their finances.

With 18 affirmative votes, no negative and abstention, the chamber passed Senate Bill (SB) No. 1849, the Financial Institutions Strategic Transfer (FIST) Act,” in anticipation of an increase in nonperforming assets (NPAs).

“This is a proactive response to the pandemic that should free up P1.19 trillion worth of loans and allow banks to lend to some 600,000 MSMEs (micro, small, and medium enterprises) and save over 3.5 million jobs,” Senator Grace S. Poe-Llamanzares said in a statement on Tuesday evening.

The measure was approved by the Senate on second and third reading on the same day, as President Rodrigo R. Duterte certified the bill as an urgent measure.

Ms. Poe-Llamanzares, who chairs the Senate Banks and Financial Intermediaries Committee, previously said the industry’s NPAs are projected to reach P635 billion by the end of the year.

As of end-September, bad loans stood at P364.672 billion, up from P227.660 billion last year and P304.997 billion as of end-August. Gross nonperforming loan (NPL) ratio reached 3.4% as of September, the highest since May 2013.

SB 1849 provides for the creation of FIST corporations that will be allowed to invest in or acquire NPAs and engage third parties for its management, operation, collection and disposal.

“This is a much-improved version of the SPV (Special Purpose Vehicle). The FIST does away with the requirements that delayed the transfer of assets without diminishing the rights of borrowers under existing laws,” she said.

Ms. Poe-Llamanzares was referring to Republic Act No. 9182, the SPV Law of 2002, that was enacted to help banks recover in the wake of the Asian Financial Crisis.

The FIST bill expanded covered institutions to include lending companies and other credit-granting companies, licensed by the BSP, which were under the SPV law. It also prohibits government financial institutions from setting up their own FIST corporations.

Under the bill, FIST corporations are allowed to transfer or purchase assets that became nonperforming before Dec. 31, 2022.

The counterpart measure, House Bill No. 6816 was approved on third reading in the House of Representatives in June.

House Committee on Banks and Financial Intermediaries Chairman and Quirino Rep. Junie E. Cua said he expects the Bicameral Conference Committee to approve the measure within the month, in time for its signing by the end of the year.

“I hope we can finish it within the month because we are rushing it,” Mr. Cua said in a phone interview on Wednesday. “Para by January, naka-ready na ’yung batas. Gagawin pa ’yung IRR (Implementing Rules and Regulation).”

Ms. Poe-Llamanzares had said the bill, as approved by Senate, can be implemented without an IRR.

The FIST bill was among the coronavirus disease 2019 (COVID-19) response measures the Senate wants to pass by yearend. This is on top of the P4.5-trillion national budget for 2021 and the Corporate Recovery and Tax Incentives for Enterprises bill that will lower corporate income tax to 25% immediately and streamline fiscal incentives.