Bid to allow AMCs to buy each other’s NPAs bucked

The House of Representatives may scrap a provision in the proposed special purpose asset vehicles (SPAV) or asset management companies (AMC) that allows them to invest in similar entities.

The House committee on banks and financial intermediaries is considering deleting such provision after the Bangko Sentral ng Pilipinas (BSP) and the Department of Finance (DOF) opposed this provision under House Bill 4048 which was sponsored by Speaker Jose de Venecia Jr.

Under section 11 of HB 4048, the SPAV is allowed to invest in or acquire nonperforming assets (NPAs) of financial institutions including real estate, company shares, loan receivables, secured assets and investment unit instruments of other SPAVs.

During a recent hearing, BSP representatives said a SPAV’s investment in a similar vehicle will complicate the central bank’s regulatory supervision over these entities. The BSP said in its position paper submitted to Congress that such provision provides an opportunity for overlapping or reciprocal investments among the SPAV.

On the other hand, the Bankers Association of the Philippines (BAP) said the SPAV should not be prohibited from investing in a like-vehicle. Barring an SPAV from teaming up with another SPAV will be very limiting, the BAP said.

The DOF said the BAP’s concern over the likelihood of a lack of funds for the SPAV can be addressed by increasing capital contributions of investors and not funds from SPAVs.

Such cross-investments will result in more regulatory problems, the DOF said.

Commercial banks with huge nonperforming assets (NPAs) are eagerly awaiting for the passage of the bill that paves the way for the creation of these facilities.

Among the biggest banks that have earlier expressed their desire to put up such vehicles are Equitable PCI Bank, Metropolitan Bank and Trust Co. and Landbank of the Philippines.

The Philippine National Bank (PNB) and the Metropolitan Bank and Trust Co. (Metrobank) in fact, plan to separately sell their soured loans or non-performing loans (NPLs) estimated at P45 billion to an AMC.

PNB president Feliciano Miranda said an initial P20 billion of the bank’s ROPOA (pertaining to the bank’s real and other properties owned or acquired) will be disposed of under an AMC in joint venture with one of the several groups that offered to put up such a facility.

Metrobank announced it will sell more than P15 billion worth of its NPLs to an AMC to be established by Lehman Brothers.

Banking sources said there are at least seven groups that expressed interest in the planned disposal of P20-billion worth of bad assets of PNB. The sources said the same groups that have earlier set their eyes on the assets of Landbank of the Philippines have also offered to do the same for PNB.

These groups include Cerberus Ltd., Lone Star Asia-Pacific Investment Ltd., Lehman Brothers, Deutsche Bank AG, JP Morgan Chase & Co., and Bank of America.

Miranda said however, that the bank prefers to wait for the proposed legislation to be passed first before committing themselves to the idea.

"The initial contribution will be our ROPOA. But we will wait for the law to be passed to save on costs," said Miranda.