Five corporations, which will absorb bad loans and assets of financial institutions badly hit by the COVID-19 pandemic have been formed, according to the Department of Finance (DOF).
But it said on Wednesday the relatively strong domestic banking system might not need rely too much on these financial institutions strategic transfer corporations (FISTCs).
The Securities and Exchange Commission (SEC), which had been tasked to approve and oversee these private asset-management firms under Republic Act No. 11523, or the Financial Institutions Strategic Transfer (FIST) Act, nonetheless pointed to small credit institutions that needed more assistance in offloading their soured loans and assets.
In a statement, the DOF said the five FISTCs established since the law was enacted last year were: Filipino-owned Philippine Equitable Recovery FIST-Asset Management Corp. (AMC), and Philippine Recovery Co. FISTC-AMC Inc.; Japanese-led Argo Global Servicing Philippines (FIST-AMC) Inc.; Swiss-owned Collectius FISTC-AMC Private Ltd. Corp.; and Resurgent Capital (FISTC-AMC) Inc., in which China Banking Corp. subsidiary China Bank Capital Corp. was a stakeholder.
The FIST Act allowed foreign equity participation in FISTCs as long as they complied with Constitutional restrictions and minimum capital requirements under the Foreign Investments Act, the DOF noted.
FIST Law
Under the FIST Law, banks and financial institutions can dispose of their nonperforming loans (NPLs) and assets (NPAs) through FISTCs, which were similar to the special purpose vehicles formed two decades ago after the East Asian financial crisis. Once rid of NPLs and NPAs, lenders are expected to extend more credit to sectors also badly hurt by the prolonged pandemic.
In turn, the government extended tax perks and lower fees on FIST-related transactions, to keep about 600,000 micro, small and medium enterprises and their 3.5 million workers afloat.
The SEC said in a report to the Finance Secretary Carlos Dominguez III that the establishment of FISTCs had been “slow” due to the “continuing strength of the Philippine banking system despite the pandemic.”