By Charmaine A. Tadalan, Reporter

THE MEASURE allowing financial institutions to offload bad loans to asset management companies had hurdled the Bicameral Conference Committee, a key legislator said.

The reconciled version of the Financial Institutions Strategic Transfer (FIST) bill has been “approved at the bicam level,” Quirino Rep. Junie E. Cua, chair of the House Committee on Banks and Financial Intermediaries, said over telephone, Saturday.

He said the bill will likely be ratified by Congress ahead of the Christmas break which starts on Dec. 19, and sent to President Rodrigo R. Duterte for his signature.

“By the end of the year, if the president signs it, the banks can already move,” he said, noting that regulatory agencies will be given 30 days to draft the implementing rules and regulations.

Under FIST, there will be a mechanism that will allow banks or lending companies to monetize bad loans.

As companies and consumers struggle amid the economic slowdown, the Bangko Sentral ng Pilipinas (BSP) anticipates the banking industry’s nonperforming loan (NPL) ratio to reach 4.6% by yearend. It reached 17.6% in the aftermath of the Asian Financial Crisis in 2002.

As of end-September, bad loans stood at P364.672 billion, bringing the gross NPL ratio to 3.4% — the highest level in over seven years.

“We are now saddled with nonperforming loans and assets. Because of this, without a mechanism such as the FIST, the banks will not be able to quickly monetize the nonperforming loans,” Mr. Cua said.

House Bill No. 6816 and Senate Bill No. 1849 provided for the creation of FIST corporations, which will be authorized to invest or acquire nonperforming assets (NPA), or engage third parties for its management, operation, collection and disposal.

“They will be able to sell or dispose of those nonperforming loans or assets to these companies, so that they can be monetized again so they can lend again,” he said.

To encourage industry participation, Mr. Cua said the measure incentivizes transactions related to the transfer of assets to FIST corporations.

Merong mga konting incentives ’yan… Pwedeng mag-tayo na ng FIST companies, the transactions by the stakeholders of participants are entitled to some incentives,” he said.

If enacted, the measure will exempt stakeholders from paying documentary stamp tax and value-added tax on the transfer of NPAs as well as capital gains tax and creditable withholding income tax on transfer of land among other assets.

Further, they will be subject to 50% of applicable registration and transfer fees for real estate mortgage and security interest, 50% of filing fees for foreclosure, and 50% of land registration fees, in lieu of other applicable fees. The tax exemptions and fee privileges were present in both the House and Senate versions.

The bill is among the priority measures President Duterte mentioned in his last State of the Nation Address. He also issued a notice certifying it as an urgent measure to allow Congress to fast-track its approval.

The House approved the FIST bill on June 2, while the Senate passed its version on Nov. 12.

The measure is an improved version of the Special Purpose Vehicle Act of 2002, under Republic Act No. 9182, enacted in the wake of the Asian Financial Crisis.

It is also among the coronavirus response measures being pushed by the Bangko Sentral ng Pilipinas, along with the proposed Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery Act (GUIDE).

A version of the GUIDE bill is now awaiting plenary action in the House of Representatives, while its counterpart remains pending at the Senate committee level.

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