Financial Institutions Strategic Transfer (FIST) Act

February 16, 2021

REPUBLIC ACT NO. 11523

AN ACT ENSURING PHILIPPINE FINANCIAL INDUSTRY RESILIENCY AGAINST THE COVID-19 PANDEMIC

SECTION 1. Title. — This Act shall be known as "Financial Institutions Strategic Transfer (FIST) Act."

SECTION 2. Declaration of Policy. — The Corona Virus Disease 2019 (COVID-19) pandemic has greatly affected nations worldwide, including the Philippines, and the measures adopted by the government to contain the outbreak have unavoidably caused serious economic setbacks and tremendous financial pressure on markets and industries. Because of the unpredictability of the course and outcome of the health crisis, it is necessary to lay down the appropriate policies not only to marshal available resources towards the most affected and vulnerable sectors but more importantly, to strengthen the financial sector so that economic recovery can be achieved faster, and with more lasting positive effects.

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. Thus, it is essential that banks and...

Summary of Republic Act No. 11523 (Financial Institutions Strategic Transfer (FIST) Act)

Title and Policy Declaration (Sections 1-2)
- This Act shall be known as the "Financial Institutions Strategic Transfer (FIST) Act".
- It aims to strengthen the financial sector to achieve economic recovery from the COVID-19 pandemic by addressing non-performing asset problems, encouraging private sector investments, eliminating barriers in acquiring non-performing assets, rehabilitating distressed businesses, and improving financial system liquidity.

Definition of Terms (Section 3)
- Defines key terms such as Approval Certificate, Approved Plan, Certificate of Eligibility, Data Package, Financial Institutions (FIs), FISTC Plan, Investment Unit Instruments (IUIs), Non-Performing Assets (NPAs), Non-Performing Loans (NPLs), Real and Other Properties Acquired (ROPAs), and True Sale.

Financial Institutions Strategic Transfer Corporation (FISTC) (Sections 4-11)
- A FISTC is a stock corporation organized under the Revised Corporation Code, with minimum capital requirements specified in Section 7.
- Powers of a FISTC include investing in or acquiring NPAs, restructuring debt, foreclosing, issuing IUIs, and other related activities (Section 5).
- Applications for establishing a FISTC must be filed within 36 months from the law's effectivity (Section 6).
- A FISTC Plan must be submitted and approved by the Securities and Exchange Commission (SEC) (Sections 8-9).
- IUIs can be issued by a FISTC, subject to SEC rules, and can be acquired by qualified buyers with a minimum investment of ₱10 million (Sections 10-11).

Transfer of Assets to FISTC (Sections 12-14)
- Procedures for transferring NPLs to a FISTC, including notice to borrowers and obtaining a Certificate of Eligibility (Section 12).
- Transfers of NPAs to a FISTC shall be in the nature of a true sale, without the need for borrower's consent (Section 13).
- No court, except the Court of Appeals and the Supreme Court, shall issue injunctive relief against the transfer of NPAs (Section 14).

Incentives and Exemption Privileges (Sections 15-18)
- Transfers of NPAs to and from a FISTC are exempt from various taxes and fees for a specified period (Section 15).
- Additional tax exemptions and fee privileges for FISTC's capital infusion and new loans to rehabilitate borrowers (Section 16).
- Net Operating Loss Carry-Over (NOLCO) provisions for participating FIs (Section 17).
- Penalties for abuse of tax exemptions and privileges (Section 18).

Enforcement and Protection Provisions (Sections 19-20)
- FISTCs must set up a financial consumer protection mechanism for borrowers (Section 19).
- Redemption periods for properties shall follow existing laws (Section 20).

Accounting, Reporting, and Implementation (Sections 21-29)
- FISTCs must maintain accurate accounts, appoint external auditors, and submit reports (Sections 21-22).
- The SEC is the primary implementing agency and can enlist assistance from other government agencies (Section 23).
- Penalties and administrative sanctions for violations (Section 24).
- Applicability to assets that became non-performing as of December 31, 2022 (Section 25).
- Creation of a Joint Congressional Oversight Committee (Section 27).
- Use of registration fees by the SEC (Section 28).
- Implementing rules and regulations to be issued within 30 days (Section 29).

Final Provisions (Sections 30-32)
- Separability clause (Section 30).
- Repealing clause, repealing the Special Purpose Vehicle (SPV) Act of 2002 (Section 31).
- Effectivity clause (Section 32).