OFFICE OF THE GOVERNOR

A. Mabini St., Malate 1004 Manila, Philippines • (632) 708-7701 • www.bsp.gov.ph • bspmail@bsp.gov.ph

CIRCULAR NO. ____

Series of 2021

Subject: Implementation of Republic Act (R.A.) No. 11523, otherwise known as the Financial Institutions Strategic Transfer (FIST) Act of 2021

The Monetary Board in its Resolution No. ____ dated ______, approved the following amendments to the Manual of Regulations for Banks (MORB) and the Manual of Regulations for Non-Bank Financial Institutions (MORNBFI) to implement R.A. No. 11523, otherwise known as the FIST Act and its implementing rules and regulations (IRR).

Section 1. The following provisions shall be added under Section ___ of the MORB and Sections __-Q/___-N/___-S/__-CC/__-P of the MORNBFI: Transfer/sale of non-performing assets to a Financial

Institutions Strategic Transfer (FIST) Corporation, Special

Purpose Vehicle or to an individual under the FIST Act.

Statement of Policy.

The Bangko Sentral is committed to maintaining a sound and safe

financial system. This Section sets forth the guidelines

governing the sale and transfer of non-performing assets (NPAs)

by banks, government or private, and other credit granting

institutions under the supervision of the Bangko Sentral to a

Financial Institution Strategic Transfer Corporation

(FISTC)/Special Purpose Vehicle (SPV) or to qualified

individuals pursuant to Republic Act (R.A.) No. 11523, otherwise

known as the Financial Institutions Strategic Transfer (FIST)

Act and its Implementing Rules and Regulations (IRR). The

implementation of the FIST Act reinforces the BSP-Supervised

Financial Institutions’ (BSFIs’) primary role of providing

financial services and liquidity to support households, business

enterprises and productive sectors of the economy by allowing

BSFIs to dispose of their non-performing assets and increase

their risk-bearing capacity.

Sale/transfer transactions of NPAs by BSFIs for purposes of

availing of the tax exemptions and incentives/privileges under

the FIST Act and its IRR shall comply with the provisions under

this Section.

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Definition of Terms

For purposes of this Section, the following definitions shall

apply:

a. Act is the Financial Institutions Strategic Transfer (FIST) Act under R.A. No. 11523.

b. Certificate of Eligibility (COE) refers to the certificate

issued by the Bangko Sentral as to the eligibility of the

non-performing loan (NPL) or real and other properties

acquired (ROPA) for purposes of availing of the tax

exemptions and fee privileges under the Act and its IRR;

c. Data Package shall refer to the complete set of documents

prescribed by the Securities and Exchange Corporation under

Rule No. 5 of the IRR and the additional documentation

required under this Section (Sale and Transfer of Assets) in

respect of the sale/transfer of non-performing assets to the

FIST Corporation/Special Purpose Vehicle. The Data Package

should contain, among others, scans of all pertinent

documents and particulars of each property or loan account

being sold and should be made electronically available to

potential FISTC/SPV/individual bidders;

d. FIST Corporation (FISTC) shall refer to a stock corporation

organized in accordance with the provisions of Section 4 of

the Act and Rule 4 of the IRR.

e. Non-performing assets (NPAs) refer to the non-performing

loans and real and other properties acquired (ROPAs) of BSFIs

that have been classified as NPA on or before 31 December

2022.

f. Non-performing loans (NPLs) shall refer to secured or

unsecured loans, receivables, and other financial assets of

similar nature, including restructured loans and sales

contracts receivable, whose principal and/or interest have

remained unpaid for at least ninety (90) days after they have

become past due or any of the events of default under the

loan agreement has occurred.

In the case of pawnshops, NPLs shall refer to pawned items

that have not been redeemed by a pawner within the ninety

(90) – day grace period under Section 305-P of the MORNBFI.

It shall also include loans that are classified as items in

litigation on or before December 31, 2022 for which

collection and foreclosure cases have been filed, and

restructured loans which are classified as NPAs on or before

December 31, 2022 under the Act.

g. Real and Other Properties Acquired (ROPAs) refer to real and

other properties, acquired by a BSFI in settlement of loans

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and receivables, including real properties, shares of stocks,

and personal properties which have been acquired by way of

dation in payment(dacion en pago) or judicial or extra-

judicial foreclosure or execution of judgment or enforcement

of security interest;

h. Sales contract receivables (SCRs) refer to the amortized cost

of assets acquired in settlement of loans through foreclosure

or dation in payment and subsequently sold on installment

basis whereby the title to the said property is transferred

to the buyers only upon full payment of the agreed settling

price.

i. Special Purpose Vehicles (SPVs) refer to entities created

under R.A. No. 9182, as amended, otherwise known as the “The

Special Purpose Vehicle Act of 2002”.

j. True sale refers to a sale wherein the selling BSFI transfers

or sells its NPAs to an individual, FISTC or SPV, without

recourse to cash or property in exchange for the transfer or

sale, and without prejudice to the BSFI and the

individual/FISTC/SPV agreeing on sharing profits and subject

to the following results:

1. The transferor transfers full legal and beneficial title

to and relinquishes effective control over the transferred

NPAs; and

2. The transferred NPAs are legally isolated and put beyond

the reach of the transferor and its creditors:

Provided, That the transferring BSFI shall not have direct

or indirect control of the transferee FISTC/SPV: Provided,

further, That the selling BSFI does not have legal or

beneficial ownership of more than ten percent (10%) of the

transferee FISTC/SPV.

A BSFI shall comply with the provisions of Section 13 of the

FIST Act and Rule 13 of the IRR.

Notice and Manner of Sale/Transfer of NPAs

The following transactions shall comply with the following

provisions on the notice and manner of sale/transfer of NPAs,

as applicable, in accordance with Sections 12 and 15 of the FIST

Act and Rules 12 and 15 of the IRR:

a. The sale/transfer of NPAs by a BSFI to a FISTC/SPV, b. The dacion in payment (dacion en pago) of NPL by the borrower

or third party on behalf of the borrower to the BSFI,

c. The sale/transfer of NPL (secured by a real estate mortgage on a residential unit or an empty lot) by a BSFI to an

individual, and

d. The sale/transfer of ROPA (single family residential unit or an empty lot) by a BSFI to an individual.

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(1) Prior Notice. No sale/transfer of NPLs to a

FISTC/SPV/individual shall take effect unless the BSFI

concerned gives prior notice in accordance with Rule 12 of

the IRR. In providing prior notice, the BSFI shall comply

with the provisions of Rule 13, Sections 5 to 15 on the

modes of service, and Section 17 on the proof of service,

as well as Rule 14, Section 12 on the service upon domestic

private juridical entity, of the 2019 Rules of Civil

Procedure, as amended.

(2) Sale/Transfer of Assets

All sales or transfers of NPAs by a BSFI shall be in the

nature of a “true sale” in accordance with the provisions

of Section 13 of the Act and Rule 13 of the IRR.

The procedures on the Bangko Sentral’s issuance of a COE on

sale/transfer transactions of BSFIs is in Appendix ___ .

The extension of credit to an individual for the purpose of

acquiring a ROPA that is a single-family residential

unit/empty lot or NPL secured by real estate mortgage on a

residential unit or empty lot by a BSFI shall be allowed.

A selling BSFI is required to provide prospective bidders,

including individuals, FISTCs and SPVs with a data package

which shall contain, among others, scans of all pertinent

documents and particulars of each property or loan account

being sold. At a minimum, the data package shall include the

documents prescribed under Rule 5.j. of the IRR and the

following documents:

For NPLs:

a. Promissory Note/Pawn ticket,

b. Restructuring Agreement, if restructured loan, and

c. Third-party financial guarantee or surety arrangement, if applicable,

For ROPAs:

a. Proof of property’s ownership, e.g., Transfer Certificate of Title (TCT), with registered real estate mortgage

(REM), Certificate of Stocks, Official

Receipt/Certificate of Registration for motor vehicle,

if applicable,

b. Certificate of Sale (COS) for Extra-judicial foreclosure /Notarized Deed of Dacion in case of dation in

payment/judgment in case of judicial foreclosure for real

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estate ROPAs with unconsolidated land title, as

applicable, and

c. Latest Real Estate Tax Receipt, if applicable,

For SCRs:

a. Notarized Sales Contract, and

b. Latest Real Estate Tax Receipt (if applicable).

(3) Subsequent notice and transfers. After the execution of the NPL’s sale or transfer documents, the transferring BSFI

shall comply with the provisions of Rule 12 on subsequent

notice and transfers.

Prudential Treatment of Sale/Transfer of NPAs

The guidelines on the prudential treatment of sale/transactions

of NPAs by BSFIs that avail of the tax exemptions and

incentives/privileges under the Act are in Appendix __ .

Prudential Report

BSFIs that avail of the tax exemptions and incentives/privileges

under the Act shall submit to the Department of Supervisory

Analytics (DSA) a Monthly Report on FIST Transactions

(Attachment 1). The report shall be considered a Category B

report and shall be submitted within fifteen (15) banking days

from the end of the reference month for universal, commercial,

and thrift banks and within twenty (20) banking/business days

after end of reference month for rural/cooperative banks and

other BSFIs. The submission of the Monthly Report on FIST

Transactions shall be subject to guidelines provided under Sec.

171/172-Q/143-N/162-S/161-P of the MORB/MORNBFI, as applicable.

Enforcement Actions

A BSFI, and/or its concerned officers, which violate any

provisions of the FIST Act, or who in a notice or certification,

makes any untruthful statement of a material fact or omits to

state a material fact shall be imposed a fine in accordance with

the provisions of Sections 18 and 24 of the Act and Rules 18 and

24 of the IRR. This is without prejudice to the enforcement

actions that may be deployed by the BSP consistent with Sec. 002

of the MORB and Sections 002-Q/001-N/002-S/121-CC/002-P of the

MORNBFI(Supervisory enforcement policy).

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Section 2. The following provisions shall be added under Section ____-P (Notice and Manner of Transfer of NPAs) of the MORNBFI:

Notice and Manner of Transfer of NPAs xxx

(1) Prior Notice. xxx

For purposes of implementing the requirements on prior

notification, a pawnshop shall comply with the provisions of

Section 305-P. The pawnshop shall give the pawner a period of

at most thirty (30) days upon receipt of notice to restructure

or renegotiate the pawn under such terms and conditions as may

be agreed upon by the pawner and the pawnshop.

(2) Sale/Transfer of Assets

xxx

The sale/transfer of NPLs of a pawnshop to a FISTC/SPV shall be

through public auction as required under Sec. 321-P.

The procedures on the Bangko Sentral’s issuance of a COE on sale/transfer transactions of BSFIs is in Appendix ___ .

xxx

(3) Subsequent notice and transfers. xxx

xxx

Section 3. The following provisions shall be added under Section ___ of the MORB and Section___-Q/___-N of the MORNBFI: xxx Notice and Manner of Sale/Transfer of NPAs

xxx

Investment Transactions of a BSFI.

A BSFI may acquire or hold Investment Unit Instruments (IUIs)

in a FISTC/SPV in accordance with the provisions of Section 11

of the Act and Rule 11 of the IRR.

Investments in IUI shall be booked in accordance with the

provisions of Philippine Reporting Standards (PFRS) 9. For

purposes of determining compliance by a BSFI with the minimum

investment amount, a BSFI shall not be considered in violation

of the requirement due to reduction in the net carrying amount

of the IUI arising from changes in the fair market value of the

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investment, payment of principal, maturity of the IUI or

redemption of the IUI.

Prudential Treatment of Sale/Transfer of NPAs xxx

Section 4. Effectivity. This Circular shall take effect fifteen (15) days after its publication in the Official Gazette or newspaper of general circulation.

FOR THE MONETARY BOARD:

BENJAMIN E. DIOKNO Governor

___ March 2021

Attachment 1

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Form: __________

Category: B

Deadline: within fifteen (15) banking days from the end of the reference month for universal, commercial, and thrift banks and within twenty (20) banking/business days after end of reference month for rural/cooperative banks and other BSFIs

FOR BSP-SUPERVISED FINANCIAL INSTITUTIONS

Name of BSFI Code

Address

REPORT ON THE SALE/TRANSFER AND INVESTMENT TRANSACTIONS OF BSFIs UNDER THE FINANCIAL INSTITUTIONS STRATEGIC TRANSFER (FIST) ACT

As of

(Month-End)

I hereby certify that all matters set forth in this report are true and correct, to the best of my knowledge and belief.

(Signature of Authorized Officer)

Attachment 1

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(Name of BSFI) Transactions under the FIST Act For the Month Ended ____ (In Absolute Amounts)

PARTICULARS AMOUNT

I. Balance as of Date of Sale

(For BSFIs with more than one sale transaction, add the balances as of the date of sale of each transaction)

A. NPAs sold, amortized cost (Annex A) xx

Allowance for Credit Losses on NPAs sold (xx)

Net Carrying Amount xx

B. Allowance for Credit Losses on NPAs Sold Applied to:

1. Booked Allowance for Credit Losses, Loans xx

2. Booked Allowance for Credit Losses, ROPA xx

Sub-total xx

C. Cash Received xx

D. Financial Instruments Received as Consideration on the Sale/Transfer of NPAs (As of Sale Date)

1. Fair Value through Profit or Loss (FVPL) xx

2.

Fair Value through Other Comprehensive Income (FVOCI) (net of unamortized discount/premium)

xxx

Accumulated Market Gains/Losses xx/(xx)

FVOCI, net xx

3. Debt Securities at Amortized Cost (net of unamortized discount/premium) xx

Allowance for Credit Losses xx

Debt Securities at Amortized Cost, Net xx

Sub-total xx

E. Deferred Charges xx

II. Outstanding Balance as of End of Reporting Month

A. Financial Instrument Received as Consideration on the Sale/Transfer of NPAs

1. Fair Value through Profit or Loss (FVPL) xx

2. Fair Value through Other Comprehensive Income (FVOCI) (net of unamortized discount/premium) xx

Accumulated Market Gains/Losses xx/(xx)

FVOCI, net xx

3. Det Securities at Amortized Cost (net of unamortized discount/premium) xxx

Allowance for Credit Losses (xx)

Debt Securities at Amortized Cost, Net xx

Sub-total xx

B. Investments in Investment Unit Instruments

1. Fair Value through Profit or Loss (FVPL) xx

2. Fair Value through Other Comprehensive Income (FVOCI) (net of unamortized discount/premium) xx

Accumulated Market Gains/Losses xx/(xx)

Attachment 1

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PARTICULARS AMOUNT

FVOCI, net xx

3. Det Securities at Amortized Cost (net of unamortized discount/premium) xx

Allowance for Credit Losses (xx)

Debt Securities at Amortized Cost, Net xx

Sub-total xx

C. Deferred Charges, Gross xx

Less: Deferred Charges Written Down xx

Net Carrying Amount of Deferred Charges xx

Attachment 1

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(Name of BSFI) Annex A: NPAs Sold Under the FIST Act For the Month of _______ (In absolute Amounts)

A. Non-Performing Loans (NPL)

COE Number1

Details on NPLs Sold Sale Details

Loan Type1

Outstanding Balance at the Time of Sale Amount of Consideration Received

(As of Sale Date) Gain/Loss on Sale/Transfer

Amortized Cost

Allowance for Credit Losses

Net Carrying Amount

Cash Financial

Instruments

Total Selling Price

Outright Recognition

Deferred Amount

Total

1 The following options shall be included in the template for purposes of describing loan type:

1. Agrarian Reform / Other Agricultural Loans 2. MSME Loans 3. Contracts to Sell 4. Loans to Private Corporations 5. Loans to Individuals for Housing Purposes 6. Loans to Individuals-Credit Card 7. Loans to Individuals-Motor Vehicle Loans 8. Loans to Individuals-Salary-Based General-Purpose Consumption Loans 9. Loans to Individuals Primarily for Personal Use Purposes-Others 10. Loans to Individuals for Other Purposes

Attachment 1

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B. Real and Other Properties Acquired (ROPA)

COE Number1

Details on ROPA Sold Sale Details

ROPA Property Type2

Outstanding Balance at the Time of Sale Amount of Consideration Received (As

of Sale Date) Gain/Loss on Sale/Transfer

Cost Accumulated Depreciation

Allowance for Credit

Losses

Net Book Value

Cash Financial

Instruments Total

Outright Recognition

Deferred Amount

Total

2 The following options shall be included in the template for purposes of describing property type:

1. Land only 2. Land and building 3. condominium unit 4. machineries and equipment 5. Motor vehicle 6. shares of stocks 7. debt securities 8. other financial instruments 9. other personal properties 10. others

Attachment 1

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C. Additional Information: NPAs with issued COE that remain unsold (As of End of the Reporting Month)

COE number NPA Type3

Outstanding Balance (Net

Carrying Amount)

3 The following options shall be included in the template for purposes of describing type of non-performing asset:

1. NPL 2. ROPA 3. SCR