BSP seeks comments on draft guidelines for FIST law

THE Bangko Sentral ng Pilipinas (BSP) has started asking banks and other concerned parties for their feedback on the draft guidelines of the law that would allow financial institutions to offload soured assets through asset management companies.

The BSP posted on Wednesday three separate draft circulars that will make up the implementing rules and regulations (IRR) of Republic Act No. 11523 or the Financial Institutions Strategic Transfer (FIST) Act. The law covers nonperforming assets (NPAs) until end-2022.

It will accept comments until March 8.

One of the draft circulars states that all sales or transfers of NPAs by financial institutions to asset management companies, referred to as FIST Corporations, should be in the nature of a “true sale.”

“True sale refers to a sale wherein the selling BSFI (BSP-supervised financial institutions) transfers or sells its NPAs to an individual, FIST Corporation, or special purpose vehicle (SPV) without recourse to cash or property in exchange for the transfer or sale, and without prejudice to the BSFI and the individual/FISTC agreeing on sharing profits,” the regulator said.

It said selling or transferring these NPAs will mean the seller or transferor will fully transfer the legal and beneficial title to the buyer or transferee and give up its control to the assets.

The transferred NPAs will also be “legally isolated” and should be placed beyond the reach of the seller and the creditors.

The BSP said financial institutions should neither have a direct nor an indirect control of the FISTC or the SPV that bought the NPAs and should not have more than 10% legal or beneficial ownership in the buyer.

The draft guidelines also allows banks to do staggered booking of losses from the discounted sale of NPAs to FIST Corporations.

“The guidelines recognize that BSFIs may need temporary regulatory relief, in addition to tax relief under the FIST Law, particularly on the timing of recognition of losses, so that they may be encouraged to maximize the sale of their NPAs even at substantial discount,” one of the draft circulars read.

The banks will have to state the impact when they avail of the regulatory relief on relevant financial reports for transparency, the central bank said.

The FIST law also exempts the transfer of NPAs to asset management companies from payment of documentary stamp tax, capital gains tax, creditable withholding income taxes and value-added tax (VAT), among other fiscal perks.

To apply for the tax exemptions, banks will have to obtain a certificate of eligibility from the central bank, which requires them to submit a master list of NPAs or real and other properties acquired (ROPA) that will be sold to FIST Corporations as one of the requirements.

The central bank will start accepting this month submissions of the master list for the period covering as of end-2020, according to one of the draft circulars. The BSP will have to issue the COE within 20 days of application. — B.M. Laforga