House OKs on 3rd reading proposed ‘Financial Institutions Strategic Transfer Act’

The House of Representatives on Tuesday approved on third reading the measure that seeks to help financial institutions resolve their debts and manage their non-performing assets (NPAs) to temper the effects of the COVID-19 crisis on their financial operations.

With 202 affirmative votes, six negative, and one abstention, the chamber approved House Bill 6816, or the proposed "Financial Institutions Strategic Transfer (FIST) Act" introduced by House Committee on Banks and Financial Institutions chair Junie Cua Jr.

The measure reaffirms the state's recognition of the role of banks and other financial institutions to mobilize savings and investments and provide vital financial system liquidity to keep the economy going, making it necessary for these entities to be able to maintain financial health to ease the impact of the COVID-19 crisis.

According to Cua, the COVID-19 crisis and disruption of economic activities caused most financial institutions to face a period of delayed loan collections, and are at risk of recording higher NPAs across all borrower segments.

"This proposed law encourages financial institutions to sell NPAs to asset management companies, created as Financial Institutions Strategic Transfer Corporations (FISTCs), that specialize in the resolution of distressed assets," Cua said in introducing the measure.

Under the measure, FISTCs may invest in, or acquire NPAs of financial institutions and engage third parties to manage, collect, operate, and dispose of NPAs acquired from financial institutions.

In case of non-performing loans, FISTCs may also restructure debt, condone debt, and undertake other restructuring related activities, as well as renovate, improve, complete or alter their NPAs acquired from financial institutions, among others.

House Majority Leader Martin Romualdez, co-chair of the House Defeat COVID-19 Committee, said the FIST bill will help "strengthen the financial sector in the wake of the COVID-19 crisis through rehabilitation of distressed businesses and improving liquidity of the financial system."

Following the approval on third reading, the bill can now be sent to the Senate for its own consideration. — DVM, GMA News