FIST paves way for creation of 5 new firms

MANILA, Philippines — Five financial institution strategic transfer corporations (FISTCs) have been established since a law, which allows private firms to acquire the soured loans of banks, was approved nearly a year ago, the Securities and Exchange Commission (SEC) said.

Republic Act 11523, or the FIST Act, paved the way for the creation of five FISTCs, two of which are wholly owned by Filipinos while the other three have foreign investors.

According to the SEC, the Filipino-owned FISTCs are Philippine Equitable Recovery FIST-Asset Management Corp. (AMC) and the Philippine Recovery Company FISTC-AMC Inc.

On the other hand, Argo Global Servicing Philippines Inc. is owned by Japan’s Argo Global Investment Ltd; Resurgent Capital Inc. has China Bank Capital Corp., the local subsidiary of China Banking Corp., as one of its incorporators; while Collectius FISTC-AMC Private Ltd. Corp. is managed by Swiss entity Collectius 2 AG.

As mandated by the FIST Act, a FISTC runs as a stock corporation with a minimum authorized capital stock of P500 million, a minimum subscribed capital of P125 million and a minimum paid-up capital of P31.25 million. The law prohibits FISTCs to be owned by just one person.

Likewise, FISTCs must comply with the provisions of the Constitution on land and foreign equity participation and the Foreign Investments Act on minimum capital requirements.

The government offers fiscal incentives and reduced fees for FISTCs to encourage them to book the soured loans and non-performing assets (NPAs) of financial institutions.

The FIST Act hopes that by relieving banks of soured loans, they can keep their borrowing operations to assist 600,000 micro, small and medium enterprises and retain about 3.5 million jobs during the pandemic.

With just five FISTCs put up, the SEC said this proves that financing institutions remain strong despite the challenges posed by the pandemic. The agency projects that non-performing loans stood at 4.43 percent as of November last year, or less than double the pre-pandemic level and during the 1997 Asian financial crisis.

“Unlike during the Asian financial crisis, in general, Philippine banks remain well-capitalized and liquid. Hence, there is less pressure for banks to liquidate NPLs or NPAs for cash,” SEC said.

The SEC also wants FISTCs to turn their attention to credit institutions on the ground level like financing, lending and microfinance firms.