House OKs Securitization Act

The House of Representatives has approved the Securitization Act, which would allow the government to convert future income or assets into cash on hand that it can immediately use.

The measure will complement the Special Purpose Asset Vehicles (SPAV) bill that the House earlier approved and which would enable the banking system and government financial institutions to free non-performing loans and mortgages.

Speaker Jose de Venecia Jr. said he expects new investments of as much as $5 billion (P250 billion) with the enactment into law of the two measures.

He said the amount includes the $1 billion already committed by New York-based Lehman Brothers, a large investment bank.

House Bill 4453, known as the Securitization Act, was sponsored by Rep. Oscar Moreno (Lakas, Misamis Oriental), who chairs the House economic affairs committee.

The measure defines securitization as "the process by which assets are sold on without recourse basis by the originator or seller to a SPAV and the issuance of asset-backed securities which depend, for their payment, on the cash flow from the assets so sold."

De Venecia said one best example is the expected $10-billion share of the government from the production of natural gas in the Malampaya oil deposits off Palawan.

"We cannot wait for 10 years to 20 years before we can use that income for development. We can securitize it and use it now for our anti-poverty programs," he said.

The SPAV bill, on the other hand, would allow banks to dispose of their non-performing loans (NPLs) and assets more expeditiously.

The entire banking system’s NPLs are estimated to reach P250 billion.

Metrobank, the country’s largest commercial bank, has already resorted to the SPAV scheme in partnership with a foreign bank. The Bangko Sentral ng Pilipinas is now seeking the details of such an arrangement.