BSP Monetary Board approves FIST law guidelines for banks

THE CENTRAL BANK has approved the guidelines for the implementation of the Financial Institution Strategic Transfer (FIST) law, including the procedure for getting the certificate of eligibility for targeted nonperforming assets that banks want to dispose.

“The MB (Monetary Board) just approved [on Thursday] the implementing guidelines on the FIST Act. This will be issued in a form of circular,” Bangko Sentral ng Pilipinas (BSP) Deputy Governor Chuchi G. Fonacier said in a Viber message.

“A memorandum to all BSFIs will also be issued by the BSP on the procedures in applying for a Certificate of Eligibility on the NPLs (nonperforming loans) and ROPA (real and other properties acquired) that will be sold to a FIST corporation in order to avail of the tax incentives and fee privileges in the sale of these NPLs and ROPA,” she added.

Republic Act 11523 was signed in February to help financial institutions clean their balance sheets after the stress caused by the coronavirus crisis.

The BSP expects the law to help reduce the banking system’s NPL ratio by about 0.63 to 0.73 percentage point as lenders are expected to dispose of at least P152 billion in non-performing assets (NPAs).

The banking industry’s NPL ratio reached 4.21% in March, the highest since the 4.25% logged in August 2009. This, as bad loans surged by 80% to P448.592 billion from a year earlier.

Due to the rise in soured loans during the crisis, banks have become more risk-averse, causing a credit slump. Outstanding loans by big banks declined for the fourth straight month in March by 4.5% following already tepid months of credit growth. The central bank has said the FIST Law is expected to revive banks’ willingness to lend.

BSP Governor Benjamin E. Diokno has earlier said Philippine banks remain well-capitalized and strong despite the pandemic, and the FIST law will only be a fallback for banks that need it.

“Once the circular and the memorandum to all BSP-supervised institutions are signed and issued, the BSP will start accepting requests on the sale of NPLs and ROPA, collectively known as nonperforming assets,” Ms. Fonacier said.

The official said they have made changes from the guidelines of Special Purpose Vehicle (SPV) Act of 2002, which was the equivalent measure of the FIST to address the rise in bad loans in the wake of the Asian Financial Crisis.

Ms. Fonacier said the BSP’s new guidelines have a faster turnaround time for the issuance of a certificate of eligibility, or the documentary approval from the BSP for assets that will be sold to FIST corporations, to banks.

“In the FIST Act, we are required under the law to revert on bank application with complete requirements within 20 working days from receipt of the application. While in the SPV Act, it was 45 days,” she said.

The Securities and Exchange Commission in March released guidelines for FIST corporations or the asset management companies that can buy banks’ NPAs in exchange for tax incentives and fee privileges. — L.W.T. Noble

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