MANILA - Congress needs to act quickly to pass a proposed law that allows banks to offload their bad loans to asset management companies, Finance Secretary Carlos Dominguez III said Wednesday.

Dominguez said the proposed Financial Institutions Strategic Transfer (FIST) Act will protect the financial industry from any lasting damage, and ensure a steady source of credit for the pandemic-hit sectors of the economy while providing safeguards to consumers.

He said the proposed law will help the economy recover faster from the impact of the COVID-19 pandemic.

“Enacting FIST will fortify the financial sector and keep it strong and stable for the difficult task of rebuilding our economy,” Dominguez said.

FIST will allow banks to outsource the management of their non-performing assets or bad loans to asset management companies. This will let banks focus on their primary task of lending to sectors in need of credit, Dominguez said.

“By keeping non-performing assets contained and managed, FIST will expand the amount of risk banks can take. This benefit cannot be understated in a crisis, when lending to businesses is riskier but also more urgently needed,” he said.

Under the proposal, tax incentives will also be given to asset management companies to defray the transaction and transfer costs of non-performing assets.

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Dominguez said that while FIST foregoes revenues of between P3.3 billion to P13 billion every year for the next five years to clear the books of banks of bad debts, this was needed to keep the economy going.

“We believe that the economic benefits of strengthening the financial sector through this effort outweigh the fiscal costs of doing so,” he said.

FIST will also encourage the private sector, government financial institutions and government-owned or controlled corporations to help rehabilitate distressed businesses, he added.

Besides FIST, the DOF has also been batting for the approval of a bill seeking to lower the corporate income tax rate and rationalize fiscal incentives.

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