The Financial Institutions Strategic Transfer Act (FIST) — Republic Act 11523 was signed into law by President Rodrigo Duterte on February 16, 2021. This legislation is designed to support banks and financial institutions as a means of stimulating economic recovery.
Effects of Covid-19 on Financial Institutions
Financial institutions generate revenue primarily through interest on loans. During 2020, the pandemic severely disrupted this model. Many businesses closed, making it difficult for borrowers to maintain loan payments. The Bayanihan Acts 1 and 2 extended grace periods for loan collections, further straining banks' cash flows.
This created a crisis of Non-Performing Loans (NPLs) — loans whose principal and/or interest have remained unpaid for at least 90 days. Central bank data revealed that gross non-performing loans in the banking system climbed to ₱391.66 billion (3.61%) as of December 2020, from ₱234.99 billion (2.16%) in January 2020.
As a result, financial institutions restricted new lending to maintain liquidity, preventing entrepreneurs from accessing capital for business recovery.
FIST — The Solution
The FIST Act enables financial institutions to sell non-performing loans and assets to asset management companies. Key benefits include:
- Banks can unload bad debts and regain liquidity
- Financial institutions can issue new loan packages
- Increased consumer buying power and business access to capital
What's Next
The Securities and Exchange Commission, as the lead implementing agency, will draft the implementing rules and regulations. This legislation, combined with the anticipated CREATE Bill (reducing corporate tax from 30% to 25%), represents significant economic recovery measures for the Philippines.