CONGRESS has inched closer to sending to President Duterte for signing into law the final version of the proposed Financial Institution Strategic Transfer (FIST) Act, as endorsed by a bicameral conference committee that reconciled the Senate and House versions of the FIST Law.
Taking the Senate floor at Tuesday’s session, Senator Grace Poe, chairman of the Senate contingent to the bicameral conference committee on the proposed Financial Institution Strategic Transfer Act, reported to plenary the approved version of the bill, which is seen to help cushion the adverse impact of the pandemic on the financial sector, as it allows financial institutions to offload nonperforming assets, thus boosting investor and depositor confidence, and help businesses and save jobs.
“The bicameral conference committee agreed to use the Senate version as the working draft since the House adopted most of the provisions in our version,” Poe said, adding: “With the hard work of our colleagues, Senate President Pro Tempore Ralph Recto and Minority Leader Frank Drilon, as Senate conferees, and Representatives Dakila Cua, Stella Quimbo and Tiangco as House conferees, we were able to reconcile major conflicting provisions of Senate Bill No. 1849 and House Bill No. 6816.”
Poe confirmed that the Senate-House panels agreed to adopt a provision that “only the private sector shall be allowed to form FIST corporations,” acknowledging that “it would be financially risky for government to be involved in acquiring nonperforming assets as government revenue is down due to the pandemic.”
In addition, the conferees agreed that “foreign FISTCs shall not be allowed to take part in the bidding and foreclosure of real property.”
She explained that the House version earlier gave the option for foreign FISTs to easily pay off the penalty in case they are unable to transfer the property after five years. Poe noted this might result in perpetual ownership of land which is in violation of Republic Act 7042 or the Foreign Investments Act. “Thus, we deleted the provision.”
Third, Poe said, specific periods were lowered to prevent delay in offloading of assets, recalling that in the old SPV [special purpose vehicle] law, banks found it difficult to immediately offload nonperforming assets due to the long settlement period between the borrower and the bank, as well as due cases being filed in court.
“So, from the original proposal of 180 days, both panels agreed to lower the period of considering loans and other financial assets as nonperforming loans to 90 days,” the senator added. “Similarly, we also agreed to retain the borrower’s right to renegotiate loans as we recognize the need to also assist borrowers, but lowered the period of restructuring from 90 days to 30 days. Together, this gives the borrower at least 120 days to pay off or renegotiate a loan and prevent the transfer of the asset to a FISTC.”
The fourth provision—requiring prior consultation with the Philippine Competition Commission (PCC) before an asset is transferred—has been deleted, with the panel seeing this as “another administrative layer that may cause delay in the disposal of assets.”
Fifth, Poe said, “we also deleted the provision reiterating the investigative powers of the Securities and Exchange Commission and Department of Justice over violation complaints on the Anti-Dummy Law in relation to FIST transactions. This is to remove apprehension among investors over being sued for something that existing laws already cover, and encourage more investments in the financial sector.”
Sixth, to prevent delay in the implementation as what happened in the old SPV law and to respond to the need to immediately enact the bill, the panel agreed to adopt the Senate proviso that “the non-promulgation of the Implementing Rules and Regulation [IRR] shall not prevent the implementation of this Act upon its effectivity,” Poe said.
And lastly, Poe reported, the bicameral conference committee agreed to extend the applicability period to assets that have become nonperforming from December 31, 2020 to December 31, 2022 considering that NPLs build over time, adding: “And what we are seeing now is not yet the full impact of the pandemic.”
Poe credited Senate President Pro Tempore Recto and Minority Leader Drilon with helping craft the final version of the remedial legislation that protects capital to enable banks to lend more and enable borrowers to recover properties seized by banks.
“I wouldn’t have been able to do this without the expertise and patience, again, of Senator Drilon and Senator Recto. They guided us every step of the way, unyielding in their principles that it should be a fair and effective law, and so I thank them,” Poe said.
