10 May 2021

In response to the growing economic setbacks caused by the COVID-19 pandemic, the Philippines has implemented Republic Act No. 11523, or the Financial Institutions Strategic Transfer Act (“FIST Act”). The objective of the FIST Act is to aid financial institutions in their recovery from these serious economic pressures through the unloading or transfer of their non-performing assets to a special corporation. Through this measure, the government expects that the recovery of these financial institutions would spill over to other affected sectors of the community and help keep the economy afloat.

The Securities Exchange Commission (“SEC”), tasked as the primary authority to implement the law, has issued the FIST Act’s implementing rules and regulations in March 2021. FIST Act has repealed the Special Purpose Vehicle (“SPV”) Act of 2002 in its entirety.[1]

Significant provisions of the FIST Act

Creation and powers of a FIST corporation

One of the key features of the FIST Act is the creation of FIST corporations (“FISTC”), given the power and authority to invest in, or acquire non-performing assets (“NPAs”) of financial institutions (“FIs”)[2].

A FISTC shall be organised as a stock corporation[3] with a minimum authorised capital of PHP 500,000,000 (approximately USD 10,400,000)[4], and at least PHP 125,000,000 (approximately USD 2,500,000) of this should be subscribed. Of the subscribed capital, at least PHP 31,250,000 (approximately USD 650,000) should be paid up in cash. The application for the establishment and registration of a FISTC shall be filed within 36 months from the effectivity of the FIST Act.[5]

Foreign individuals and entities who consider investing in a FISTC should know that they may organise and fully own a FISTC, provided, in the course of its operations, the FISTC will not acquire land. If the corporation will purchase, hold or acquire land in whatever manner, the Constitutional limitation will be triggered, that is, the the foreign ownership of such FISTC shall be no more than 40%.

Another thing to consider if investments will be made in a FISTC is that the corporation is regarded as a corporation vested with public interest, and as a consequence of such classification, it is mandated to comply with special requirements, such as the appointment of independent directors in its board, designation of compliance officer and submission of compensation and performance reports under the Revised Corporation Code.

In addition to its primary purpose of investing in, or acquiring NPAs of FIs, a FISTC shall also be allowed to restructure or condone debt, and undertake other restructuring related activities, in the case of non-performing loans of FIs, issue equity or participation certificates or other forms of Investment Unit Instruments (“IUI”) to qualified buyers and permitted investors, and engage third parties to manage, operate, collect and dispose of NPAs acquired from FIs, among others.

Manner of transferring non-performing assets

The FIST Act allows the transfer of NPAs to FISTC. NPAs consist of non-performing loans (“NPLs”)[6], and real and other properties acquired by an FI (“ROPAs”)[7] in the settlement of loans and receivables.

For the effective transfer of the NPAs to the FISTCs, the following procedure should be observed:

  • The FI shall notify in writing its borrowers of the NPAs, and shall give such borrowers a maximum period of 30 days to restructure or renegotiate the loan;
  • Prior to the transfer of the NPAs to the FISTC, the FI shall secure a Certificate of Eligibility from the appropriate regulatory authority having jurisdiction over its operations (e.g., lending companies should secure such certification from the SEC), which shall be necessary to avail of the incentives and exemption privileges under the FIST Act; and
  • After the sale or transfer of the NPAs, the FI shall inform the borrower in writing of such fact.

The transfer of the NPAs to the FISTC shall be in the nature of a true sale, provided the above procedures are complied with, which means, the full legal and beneficial title to and effective control over of the NPAs are relinquished by the transferor, and the NPAs are legally isolated and put beyond the reach of the transferor and its creditors. Notwithstanding the notification required to be given to the borrowers, FIs can transfer the NPAs to a FISTC without such borrowers’ consent.

Incentives and privileges of a FISTC

The transfer of NPAs by the FI to a FISTC and by the FISTC to a third party shall be exempt from the following taxes:

  • documentary stamp tax;
  • capital gains tax imposed on the transfer of lands and/or other assets treated as capital assets;
  • creditable withholding income taxes imposed on the transfer of land and/or buildings treated as ordinary assets;
  • value-added tax.

Additionally, such transfers shall enjoy reduced registration, transfer and filing fees prescribed by the Rules of Court and existing circulars of the Land Registration Authority.

The transfers of NPAs to a FISTC are entitled to these incentives and privileges for a period of not more than two years from the effectivity of the FIST Act. Meanwhile, transfers of NPAs from a FISTC to a third party acquired within such two-year period shall enjoy these incentives for a period not more than five years from the date of the acquisition of the NPA by the FISTC.

It is important to highlight that the provisions of the FIST Act are applicable to assets that have become non-performing on or before 31 December 2022.


With the seemingly continuous increase in COVID-19 cases and the drastic measures resorted to by governments in response to it, businesses are grappling with the reality that recovery from the economic upsets they have been experiencing since the past year may take longer than predicted. To keep their operations going, businesses turn to the expertise and resources of financial institutions. It is therefore only essential that assistance is also extended to such financial institutions.

The Philippine government and its agencies, such as the Bangko Sentral ng Pillpinas “recognises the importance of offloading non-performing assets to free up needed liquidity for lending to productive sectors, which is crucial economic recovery.”[8] By passing the FIST Act, it is hoped that the financial sector will be able to recoup from the complications caused by the pandemic, and consequently, help in the recovery of the rest of the business community.


If you have any questions or require any additional information, please contact Felix Sy or Reeneth B. Santos of Insights Philippines Legal Advisors (a member of ZICO Law).

This alert is for general information only and is not a substitute for legal advice.



[1] While the FIST Act has repealed the SPV Act of 2002, existing SPVs are qualified to avail of the privileges and incentives under the FIST Act, provided the corporation amends its Articles of Incorporation and corporate name to include the acronym “FIST-AMC”, or FIST-Asset Management Corporation.

[2] FIs are defined as credit-granting institutions, limited to the Bangko Sentral ng Pilipinas (“BSP” or Central Bank of the Philippines), banks, financing companies, investment houses, lending companies, accredited microfinance nongovernment organisations, insurance companies, government FIs, government-owned or –controlled corporations and other institutions licensed by the BSP to perform quasi-banking functions and credit-granting activities.

[3] A One Person Corporation cannot organize as a FISTC.

[4] USD 1 = PHP 48.00

[5] The law immediately took effect upon its publication in February 2021.

[6] For a loan to be considered as non-performing, its principal and/or interest shall have remained unpaid for at least 90 days after they have become past due or if any of the events of default under the loan agreement has occurred.

[7] Including real properties, shares of stocks and personal properties that have been acquired by way of dation in payment or judicial or extrajudicial foreclosure or execution of judgment or enforcement of security.

[8] Daxim L. Lucas, BSP urges banks to use FIST law to cleanse books of billions in bad debt, 29 March 2021, at https://business.inquirer.net/320342/bsp-urges-banks-to-use-fist-law-to-cleanse-books-of-billions-in-bad-debt#ixzz6rAa1tmkN (last accessed 12 April 2021).


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