Senate approves FIST Act on third reading

The Senate in its session Tuesday, November 10, 2020, passed on third and final reading the bill which will provide a lifeline to businesses and save over 3.5 million jobs amid the economic slowdown brought about by the COVID-19 pandemic.

With 18 affirmative votes, no negative vote, and no abstention, Senate Bill No. 1849 or the Financial Institutions Strategic Transfer Act was finally approved minutes after its Second Reading approval. The bill, which was certified urgent by the President, allows all banks to sell their non-performing assets while availing of fiscal incentives.

Sen. Grace Poe, principal author and sponsor of the bill, described the measure as a pro-active response to the COVID-19 pandemic which, according to the estimates from the National Economic and Development Authority, can possibly free up P1.19 trillion worth of loans from the sale of non-performing assets to management companies called FIST corporations.

"This, in turn, could help serve around 600,000 micro, small, and medium enterprises (MSMEs), and save over 3.5 million related jobs," said Poe, chairperson of the Committee on Banks, Financial Institutions and Currencies.

Under the bill, the institutions covered by the Special Purpose Vehicle law will be expanded to include lending companies and other institutions licensed by the Bangko Sentral ng Pilipinas to grant credit.

The bill also offers longer applicability period for up to 36 months for assets that have become non-performing as of December 31, 2022 which will give sufficient time to financial institutions to assess the need to offload assets.

As a safeguard against abuse of the system, the bill states that one-person corporations are prohibited to set up their own FIST corporations.

Further, to ensure that limited government resources will not be used for risky endeavors, government financial institutions will not be allowed to set up their own FIST corporations. To address possible violations of the anti-dummy law, foreign participation in foreclosure sales of lands is removed. The Securities and Exchange Commission and the Department of Justice are given the power and responsibility to investigate violations.

Poe thanked her colleagues for accommodating and passing this priority measure which, she said, is "important for our economy and for the businesses and for our banks to maintain a healthy financial situation in our country."