Financial Institutions Strategic Transfer (FIST) Act

Case Overview and Summary

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

Title and Declaration of Policy (Sections 1-2)
• Aims to strengthen the financial sector to achieve economic recovery from the COVID-19 pandemic.
• Develops policies to address non-performing asset problems, encourage private investments, eliminate barriers in acquisition, rehabilitate distressed businesses, and improve 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.
• Powers of a FISTC include acquiring NPAs, restructuring debt, foreclosing, issuing IUIs, and borrowing money (Section 5).
• Applications for establishing a FISTC must be filed within 36 months from the law's effectivity (Section 6).
• Minimum capital requirements for a FISTC (Section 7).
• Requirements for submitting a FISTC Plan to the Securities and Exchange Commission (SEC) for approval (Section 8).
• Provisions for approval, rejection, suspension, or revocation of a FISTC Plan by the SEC (Section 9).
• Issuance of IUIs by a FISTC is subject to SEC rules and regulations (Section 10).
• Qualified buyers as defined in the Securities Regulation Code may acquire IUIs with a minimum investment of ₱10,000,000.00 (Section 11).

Transfer of Assets to FISTC (Sections 12-14)
• Procedures for notice and manner of transfer of NPLs and NPAs to a FISTC, including a 30-day period for borrowers to restructure or renegotiate loans (Section 12).
• Transfers of NPAs must be certified as eligible by the appropriate regulatory authority (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).
• Restrictions on courts issuing 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, including documentary stamp tax, capital gains tax, creditable withholding income taxes, and value-added tax or gross receipts tax (Section 15).
• Reduced registration, transfer, filing, and land registration fees for transactions involving a FISTC (Section 15).
• Tax exemptions and fee privileges are valid for 2 years for transfers from FIs to a FISTC, and 5 years for transfers from a FISTC to third parties (Section 15).
• Additional tax exemptions and fee privileges for a FISTC providing financial assistance to rehabilitate borrowers' businesses (Section 16).
• Net Operating Loss Carry-Over (NOLCO) provisions for FIs transferring NPAs within the 2-year period (Section 17).
• Penalties for abuse of tax exemptions and privileges (Section 18).

Enforcement and Protection Provisions (Sections 19-20)
• A FISTC must set up a financial consumer protection mechanism for borrowers (Section 19).
• Redemption periods for properties acquired by a FISTC shall be governed by existing laws (Section 20).

Accounting and Reporting Provisions (Sections 21-22)
• A FISTC must maintain accurate accounts, appoint an external auditor, and allow regulatory agencies to inspect its books (Section 21).
• Reporting requirements for FISTCs and FIs, including a database of sales and transfers (Section 22).

Final Provisions (Sections 23-32)
• The SEC is the primary implementing agency (Section 23).
• Penalties and administrative sanctions for violations of the law (Section 24).
• Applicability of the law 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).
• Promulgation of implementing rules and regulations (Section 29).
• Separability clause (Section 30).
• Repealing clause, repealing the Special Purpose Vehicle (SPV) Act of 2002 (Section 31).
• Effectivity clause (Section 32).