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In brief

Recent developments

On 16 February 2021, President Rodrigo Duterte signed Republic Act No. 11523 or the Financial Institutions Strategic Transfer Act (“FIST Act“). The FIST Act allows financial institutions (FIs), including the Bangko Sentral ng Pilipinas (BSP), banks, financing companies, investment houses, lending companies, insurance companies, government financial institutions, government-owned or -controlled corporations, and other institutions licensed by the BSP to perform quasi-banking functions and credit-granting activities, to offload non-performing loans and other bad assets to a Financial Institutions Strategic Transfer Corporation (FISTC). The law took effect on 22 February 2021.

Salient points of the FIST Act

Establishing a FISTC

A FISTC must be a stock corporation organized in accordance with Republic Act No. 11232 or the Revised Corporation Code (RCC). It cannot be incorporated as a one-person corporation. A FISTC shall have a minimum authorized capital stock of PHP 500 million, with a subscribed capital stock of PHP 125 million and a minimum paid-up capital of PHP 31.25 million. If the FISTC shall acquire land, 60% of its outstanding capital stock must be owned by Philippine nationals.

Applications for the establishment and registration of a FISTC shall be filed with the Securities and Exchange Commission (SEC) within 36 months from effectivity of the FIST Act. Entities created under Republic Act No. 9182 or the Special Purpose Vehicle Act of 2020, are covered by the law.

Within the period to be prescribed by the SEC reckoned from the establishment of a FISTC, a FISTC plan must be submitted to the SEC for approval. Upon approval of the FISTC plan, the SEC shall issue an approval certificate stating that the FISTC plan has been rendered effective and the sale and distribution of investment unit instruments covered by such plan has been authorized.

Rules on the transfer of loans to a FISTC

  1. No transfer of secured or unsecured loans, receivables, and other financial assets of a similar nature, including restructured loans, whose principal and/or interest have remained unpaid for at least 90 days after they have become past due or any of the events of default under the loan agreement has occurred (NPLs) to a FISTC shall take effect unless the FI concerned shall give prior written notice to (i) the borrowers of the NPLs and (ii) all persons holding prior encumbrances upon the assets mortgaged or subject to security interest. After the sale or transfer of the NPLs, the transferring FI shall inform the borrower in writing at the last known address of the fact of the sale or transfer of the NPLs. In the transfer of the NPLs, the provisions on the right of the debtor to reimburse the assignee or transferee under Article 1634 of the New Civil Code shall not apply.
  2. The transfer of non-performing loans and real and other properties acquired by FIs (NPAs) from an FI to a FISTC shall be subject to prior certification of eligibility as NPA by the appropriate regulatory authority having jurisdiction over its operations, which shall issue its certification within 20 working days from the date of application by the FI for eligibility. All sales or transfers of NPAs to a FISTC shall be in the nature of a true sale.
  3. No court, other than the Court of Appeals and the Supreme Court, shall issue any injunctive relief against the transfer of NPAs from the FI to a FISTC, and from a FISTC to a third party, or dation in payment by the borrower or by a third party in favor of an FI or in favor of a FISTC, or judicial or extrajudicial foreclosure sales or execution sales of the FI or FISTC of collateral in settlement of NPLs.

Incentives and privileges available to a FISTC

  1. The transfer of NPAs from the FI to a FISTC, and from a FISTC to a third party or dation in payment by the borrower or by a third party in favor of an FI or in favor of a FISTC, shall be exempt from the following taxes:
  • documentary stamp tax on the above-mentioned transfer of NPAs
  • capital gains tax imposed on the transfer of lands and/or other assets treated as capital assets
  • value-added tax or gross receipts tax imposed on the transfer of NPAs

However, such transfers shall be subject to the following, in lieu of applicable fees:

  • 50% of the applicable registration and transfer fees on the transfer of real estate mortgage and security interest to and from the FISTC
  • 50% of the filing fees for any foreclosure initiated by the FISTC in relation to any NPA acquired from an FI
  • 50% of the land registration fees

The above-mentioned privileges and fees also extend to any individual, subject to the following conditions:\

  1. The transaction is limited to either a single family residential unit or an empty lot, acquired by an FI in settlement of loans and receivables, or to NPL secured by a real estate mortgage on a residential unit or an empty lot.
  2. There shall only be one transaction consisting of one residential unit or empty lot per individual.

All sales or transfers of NPAs from the FIs to a FISTC or transfers by way of dation in payment by the borrower or by a third party to the FI shall be entitled to the privileges for a period of not more than two years from the date of effectivity of the FIST Act.
Transfers from a FISTC to a third party of NPAs acquired by the FISTC within such two-year period, or within such extended period, or transfers by way of dation in payment by a borrower or by a third party to the FISTC shall enjoy the privileges for a period of not more than five years from the date of acquisition by the FISTC.

The certificate of eligibility duly issued by the appropriate regulatory agency is sufficient proof of the entity’s entitlement to the privileges.

  1. The FISTC shall be exempt from income tax on net interest income, documentary stamp tax and mortgage registration fees on new loans in excess of existing loans extended to borrowers with NPLs that have been acquired by the FISTC. In case of capital infusion by the FISTC to the borrower with NPLs, the FISTC shall also be exempt from the documentary stamp tax. These tax exemptions and fee privileges shall apply for a period of not more than five years from the date of acquisition of NPLs by the FIST.
  2. Any loss that is incurred by an FI as a result of the transfer of an NPA within the two-year period shall be treated as ordinary loss. The accrued interest and penalties shall not be included as loss on said loss carry-over from operations, subject to the provisions of the National Internal Revenue Code of 1997 on Net Operating Loss Carry-Over (NOLCO). Such loss incurred by the FI from the transfer of NPAs within the two-year period may be carried over for a period of five consecutive taxable years immediately following the year of such loss. However, for purposes of corporate gain or loss, the carry-over shall be subject to pertinent laws.

Further, the tax savings derived by FIs from the NOLCO shall not be made available for dividend declaration but shall be retained as a form of capital build-up.

Actions to consider

All covered FIs may take advantage of the benefits of the establishment of a FISTC to maintain their financial health and continue to address the adverse economic impact of the COVID-19 pandemic on the public.

Quisumbing Torres will continue to provide updates on developments in the implementation of the FIST Act.


Dennis Quintero is a partner in the Corporate & Commercial/M&A Practice Group of Quisumbing Torres. He heads the Firm's Energy, Mining & Infrastructure and Financial Institutions Industry Groups. He is part of the Firm’s Competition Focus Group. He is cited as a Market Leader by the IFLR 1000: Financial and Corporate Guide 2018-2020. He is consistently ranked as a leading individual in Corporate and M&A by The Legal 500 Asia Pacific and as a leading individual in Projects, Infrastructure, and Energy/Natural Resources and Mining by the leading international legal directories (i.e., Chambers Global and Asia Pacific, IFLR1000/The Petroleum Economist, and The Legal 500 Asia Pacific). Dennis is also a Certified Public Accountant. He was appointed co-chair of the 2013 Conference of the International Bar Association and Australian Resources and Energy Law Association Southeast Asia in Singapore. He is a member of the Association of International Petroleum Negotiators. He was cited as one of IFLR’s Asia’s Best Lawyers for 2019 and 2020 (Energy & Infrastructure, M&A, Project Finance) and among Asia Business Law Journal’s “A-List” of the Top 100 lawyers in the Philippines.


Kristina R. Navarro is an associate in Quisumbing Torres' Corporate & Commercial/M&A Practice Group and a member of the Financial Institutions Industry Group and Fintech Focus Group. She has five years of experience in financial services, fintech, and loans and credit facilities.


Danielle Lauren K. Lim is a junior associate in Quisumbing Torres. She works with the Corporate & Commercial/M&A, Dispute Resolution, Employment and Tax Practice Groups. Danielle graduated from Ateneo Law School with honors and was awarded Best Thesis for Batch 2019.