Over P150B in bad assets likely to be disposed under FIST law — BSP
Luz Wendy T. Noble, Reporter
BANKS are expected to dispose of at least P152 billion in nonperforming assets (NPAs) as they take advantage of the Financial Institutions Strategic Transfer (FIST) Act, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said.
“During the Asian Financial Crisis, around 30% of the banks’ NPAs were sold under the Special Purpose Vehicle (SPV) Act,” Mr. Diokno said at an online briefing on Thursday.
“One estimate is that the same proportion of NPAs will be sold by BSP-supervised financial institutions under the FIST Act. This translates to at least P152 billion in NPAs or 30% of the banking system’s total NPAs as of Dec. 31, 2020,” he added.
Republic Act No. 11523 will allow financial institutions to clean up their balance sheets by offloading NPAs and bad loans to so-called FIST Corporations (FISTC). Its precursor, Republic Act 9182 or SPV Act of 2002, was implemented after the Asian Financial Crisis.
Mr. Diokno has earlier said FIST is expected to reduce the NPL ratio by about 0.63 to 0.73 percentage points.
Latest data from the BSP showed the nonperforming loan (NPL) ratio held by big banks stood at 3.7% in January, up from the 3.61% in December and 2.16% in January 2020. This is equivalent to P392.256 billion of bad loans, climbing 67% from the P234.987 billion seen in January 2020.
Meanwhile, BSP Office of the General Counsel and Legal Services Deputy Director Noel Neil Q. Malimban said there has been some interest from financial institutions regarding the FIST Act.
FIST Corporations will be granted with tax perks for the processes to be undergone in the implementation of the law.
Philippine National Bank Executive Vice-President and Chief Financial Officer Nelson C. Reyes said earlier this month that they are interested in tapping the provisions of the law to take advantage of its benefits to their capital.
IMPLEMENTING RULES
Meanwhile, the Securities and Exchange Commission (SEC), the Department of Finance (DoF), BSP, the Bureau of Internal Revenue (BIR), and the Land Registration Authority (LRA) released the implementing rules and regulations (IRR) of the FIST Act on Monday.
“The commission has always supported the passage of the FIST Act. With the implementing rules and regulations in place, we are optimistic that the law will serve its purpose of ensuring the resilience and recovery of the financial sector, which in turn will provide the much-needed support for businesses and consumers alike,” Emilio B. Aquino, SEC chairperson, said in a statement on Monday.
The law allows for the creation of corporations with a primary purpose of investing in or acquiring NPAs of covered financial institutions. The SEC is the primary implementing agency of the FIST Act.
“If the FISTC will acquire land, at least sixty percent (60%) of its outstanding capital stock shall be owned by Philippine nationals as defined under the FIA (Foreign Investment Act),” the IRR stated.
Foreign equity participation will also be subjected to guidelines under the FIA.
The minimum authorized capital stock of FISTCs should amount to P500 million, with a minimum subscribed capital stock of P125 million, and a minimum paid-up capital of P31.25 million.
FIST Corporations are considered vested with public interest. It should have independent directors on its board, appoint a compliance officer and submit reports on compensation and performance.
“Applications for the establishment and registration of a FISTC shall be filed with the commission within thirty-six (36) months from the effectivity of the Act,” the IRR said.
FISTCs created on the 25th and the 36th months from the Act’s effectivity will not be subjected to the tax incentives, unless a law extending the privileges is passed. — with Keren Concepcion G. Valmonte