How FIST law can help in recovery

Vaccines and vaccination are the hot topics these days and we all agree that the rollout of our national vaccination program will be an impetus for economic recovery.

To ensure a more stable economic recovery, however, the government has prepared several economic stimulus packages, including the one recently signed by President Rodrigo Roa Duterte — Republic Act 11523, otherwise known as the Financial Institutions Strategic Transfer or FIST Act.

The FIST Act, which the President previously certified as urgent and signed into law on 16 February 2021, will allow financial institutions to efficiently offload bad loans and their nonperforming assets (NPA). It will help banks and other financial institutions who are facing delayed loan collections to reduce their non-performing loan (NPL) ratio.

The enactment of the FIST law will help strengthen banks’ lending operations by freeing-up muchneeded liquidity that they can use to lend to productive sectors of the economy.

This means that more loans will be available to some 600,000 micro, small and medium enterprises (MSME) that were greatly affected by the pandemic. MSME, in turn, can continue with their operations and retain employees, which can help in the country’s economic recovery.

The National Economic and Development Authority estimated that some P1.19 trillion worth of loans can be freed up from the sale of banks’ NPA to asset management companies, which will be known as FIST corporations (FISTC).

The FIST law provides for some tax exemptions and lower fees on certain FIST-related transactions to encourage FISTC to acquire banks’ NPA and bad loans.

According to Finance Secretary Carlos Dominguez III, the FIST law will be an effective measure to ensure the stability of our financial system amid the global health and economic crises.

Secretary Dominguez said that the quick passage of the law within the first year of the pandemic is significant, unlike when the Special Purpose Vehicles (SPV) law of 2002 was enacted five years after the 1997 financial crisis.

And while I am no financial expert, I agree with this because it would mean that with the FIST law in place, we have avoided the deterioration of the quality of assets of our banking systems. This will make it easier for our banks and financial institutions to efficiently dispose of their non-performing loans and assets, clean up their balance sheets and extend credit to more sectors in need.

On behalf of the President,

I thank both Houses of the Congress for the timely passage of this law. With the

FIST law added to our existing e conomic recovery measures, we can be assured of a more efficient and stable economic recovery in the aftermath of the Covid-19 pandemic.

The national government remains committed to put the economy on a more solid path to recovery through our fiscal and economic reforms, and alongside the rollout of a mass vaccination program, we are confident that we would heal and recover as one.

“

Enactment of the FIST law will help strengthen banks’ lending operations by freeingup muchneeded liquidity that they can use to lend to productive sectors of the economy.

“

The National Economic and Development Authority estimated that some P1.19 trillion worth of loans can be freed up from the sale of banks’ NPA to asset management companies, which will be known as FIST corporations.