BSP Amends the Guidelines Implementing R.A. No. 11523 or the “Financial Institutions Strategic Transfer (FIST) Act”

The Bangko Sentral ng Pilipinas (“BSP”) issued Circular No. 1147 (the “Circular”), introducing amendments to Circular No. 1117 dated 27 May 2021 implementing R.A. No. 11523, otherwise known as the FIST Act, and its Implementing Rules and Regulations (“IRR”) for BSP-Supervised Financial Institutions (“BSFIs”).

Circular No. 1147 amended Circular No. 1117 which added Section 386 of the Manual of Regulations for Bank and Sections 363-Q/307-N of the Manual of Regulations for Non-Bank Financial Institutions. 

On the sale/transfer and investment transactions of BSFIs pursuant to R.A. No. 11523, the said circular provided the definition for Investment Unit Instruments (IUIs). Under the said circular, Investment Unit Instruments refer to a participation certificate, debt instrument or similar instrument issued by the FISTC and subscribed by Permitted Investors as provided in Section 11 of the FIST Act and Rule 11 of the IRR, pursuant to an Approved Plan. 

The definition also provided that: 

1. IUIs shall not include the instruments to be issued by the FISTC to the selling BSFIs as full or partial settlement of the NPAs transferred to the said FISTC;
2. That such issuances of the FISTC shall not be considered as deposit substitutes; and finally,
3. That these shall not form part of the capital stock of the FISTC. 

In this regard, loans, advances, or other credit accommodations obtained by the FISTC from any BSFI (other than the selling BSFI) or from its shareholders shall not be considered an IUI. 

The Circular also amended the rules on investment transactions of a BSFI. It provides that a BSFI may acquire or hold IUIs issued by a FISTC in the minimum amount of Ten Million Pesos (PHP10,000,000.00). The compliance with the minimum investment requirement is determined for each acquisition/purchase by a BSFI of IUIs of a FISTC in the primary and secondary markets and shall be based on the IUI’s acquisition cost. Moreover, changes in the net carrying value of a BSFI’s IUI holdings resulting from change in market value/fair value or impairment of the IUIs as well as maturity or redemption of the IUI by the issuer shall not affect the status of compliance of the BSFI. 

Lastly, the circular provides that a BSFI may also subscribe to, acquire, or hold shares and other securities that are not considered as IUIs and are issued by a FISTC, subject to the provisions of the FIST Act, its IRR, and other applicable Bangko Sentral regulations.