Majority Leader Martin Romualdez of the House of Representatives on Wednesday lauded the chamber's passage of the bill that would help banks and financial institutions to solve their debt problems as well as manage their non-performing assets (NPAs).
Banks and other financial institutions earlier reported a drastic spike in debts and NPAs due to the government measures that resulted in the stoppage of economic activities in the effort to contain the spread of Coronavirus Disease 2019.
Romualdez said the bill would help "strengthen the financial sector in the wake of the COVID-19 crisis through rehabilitation of distressed businesses and improving liquidity of the financial system."
On Tuesday, the chamber by a vote of 202-6 with one abstention passed House Bill 6816, or the proposed "Financial Institutions Strategic Transfer (FIST) Act" introduced by the House Committee on Banks and Financial Institutions chairman Quirino Rep. Junie Cua Jr.
Cua said the bill reaffirmed the state's recognition of the role of banks and other financial institutions to mobilize savings and investments and provide vital financial system liquidity to keep the economy going, making it necessary for these entities to be able to maintain financial health to ease the impact of the COVID-19 crisis.
He said the pandemic and the accompanying disruption of economic activities caused most financial institutions to face a period of delayed loan collections, and are at risk of recording higher NPAs across all borrower segments.
"This proposed law encourages financial institutions to sell NPAs to asset management companies, created as Financial Institutions Strategic Transfer Corporations (FISTCs), that specialize in the resolution of distressed assets," Cua said in introducing the measure.
The bill provides that FISTCs may invest in, or acquire NPAs of financial institutions and engage third parties to manage, collect, operate, and dispose of NPAs acquired from financial institutions.
FISTCs may also restructure debt, condone debt, and undertake other restructuring related activities, as well as renovate, improve, complete or alter their NPAs acquired from financial institutions, among others in the case of delinquent or nonperforming loans.