BSP Governor Rafael Buenaventura said in a recent forum of the Philippine Business Conference (PBC) that the passage of the proposed SPAV bill, including the Securitization Act, should speed up the disposal of the banking sector’s rising NPLs and arrest the uptrend in bad loans.
"NPLs ranging from 18 percent to 20 percent is clearly unacceptable," Buenaventura said during the forum attended by some of the country’s top business leaders and investors.
Buenaventura expressed optimism the SPAV will become a law soon, saying Congress is already set to extend its session hours next week to fasttrack the approval of at least six priority bills before its one-month recess starting March 15 to April 15.
Aside from the SPAV and securitization bills, Congress wants to approve the Absentee Voting Bill, the creation of the Department of Housing, amendments to the Dangerous Drugs Act and the Philippine National Railways (PNR) modernization program.
The SPAV bill is seen to help the banking sector reduce its non-performing assets, including loans and real estate properties said to be worth more than P500 billion.
Earlier, Manila Congressman Jaime C. Lopez, chairman of the committee on banks and financial intermediaries said the SPAV should be approved on second reading by Wednesday.
On the other hand, the Securitization bill is expected to provide the legal framework for the process of sealing assets to a SPAV or asset management companies (AMCs) and the issuance of asset-backed securities to investors.
Last year, NPLs of banks steadily climbed although increased lending activity and the rise in restructured loans and foreclosed assets pared down the bad loans of the banking sector in December to 17.35 percent from 18.76 percent the previous month.
The heavy exposure of banks in the real estate sector led to the rise in their NPL ratio, especially at the height of the Asian financial crisis in 1997.
The BSP has since then, been prodding BSP sees… From Page 23
banks to establish SPAVs or AMCs that will take care of sour loans and other non-performing assets.
Earlier, it was reported that US-based investment house Lehman Brothers and the country’s biggest commercial bank, Metropolitan Bank and Trust Company (Metrobank) were set to sign a memorandum of agreement (MOA) for a joint venture on an AMC. Metrobank will be the first bank to put its bad loans under an AMC.
Lehman Brothers has been conducting its due diligence in the same fashion as Cerberus Plc, another US-based concern known for coming to the aid of distressed or ailing banks and other companies.
Lehman has pledged to invest $1 billion to a venture dubbed "Philippine Recovery Fund" wherein the US-based company will buy NPLs of Philippine banks at a discount and later, sell the assets to other investors.
The sources said they expect other banks with huge NPLs to follow suit after the Lehman-Metrobank deal is sealed.
Other banks that have expressed interest in putting up AMCs are Equitable PCI Bank, Metropolitan Bank and Trust Co. and Land Bank of the Philippines.
The sources added that other banks like Philippine National Bank and the United Coconut Planters Bank (UCPB) are also expected to create their respective AMCs once both banks have resolved their ownership issue.
Meanwhile, state-managed Social Security System (SSS) plans to liquefy about P42 billion worth of housing mortgages.
The rising level of NPLs has prodded banks to seriously consider the creation of an SPAV or AMC to absorb the non-performing assets of banks. These idle assets will be bought at a substantial discount, and then turned around and sold to other investors.
NPLs refer to accounts whose principal or interest have remained unpaid for three months or more after the due date.