FIST Act draft implementing rules now up for public scrutiny
The Securities and Exchange Commission (SEC) has drafted the implementing rules of the newly enacted Financial Institutions Strategic Transfer (FIST) Act, which offers time-bound fiscal incentives to make it easier for financial institutions to unload bad debts that may pile up during the current economic difficulties brought about by the coronavirus pandemic.
The SEC, the primary implementing agency of the FIST Act, drafted the implementing rules and regulations (IRR) with inputs from the Bangko Sentral ng Pilipinas (BSP), Bureau of Internal Revenue and National Economic and Development Authority. It is now seeking public feedback before finalizing the FIST blueprint—which is expected to help the financial sector in the same way as how the old Special Purpose Vehicle (SPV) came to play after the Asian currency crisis.
The law provides that a FIST corporation or FISTC must be organized as a stock corporation other than a one-person corporation, with a minimum authorized capital stock of P500 million, of which P125 million must be subscribed and at least P31.25 million paid up.
The draft IRR provides that as corporations vested with public interest, a FISTC must have independent directors in its board of directors, appoint a compliance officer, submit compensation and performance reports, and comply with other requirements prescribed by law.
Applications for the establishment and registration must be filed with the SEC within 36 months from the effectivity of the FIST Act. But those established on the 25th to 36th month cannot avail themselves of the tax incentives unless an amendatory law extending the privileges is passed.
Privileges and incentives
Entities created under Republic Act No. 9182 as amended, or SPV Act of 2002, may avail themselves of the privileges and incentives by submitting a notarized secretary’s certificate, recent articles of incorporation and bylaws, and latest audited financial statements and general information sheet showing their compliance with the minimum capital requirements.
Under the law, the BSP, banks, pawnshops, non-stock savings and loan associations, and non-bank credit card issuers and other credit-granting institutions supervised by the central bank; financing companies, lending companies, and accredited microfinance nongovernment organizations; investment houses; insurance companies, and select government-owned and -controlled corporations and government financial institutions may transfer bad assets to FIST corporations.
Among state-controlled entities covered are Philippine Deposit Insurance Corp., Land Bank of the Philippines, Development Bank of the Philippines, National Home Mortgage Finance Corp., Philippine Guarantee Corp., Home Development Mutual Fund, Social Security System, Government Service Insurance System, Small Business Corp. and National Housing Authority are allowed to transfer bad assets to FIST corporations.
