The amount of actual NPAs sold since its enactment fell dramatically short of the P100-billion target with only six months to go before the incentives under the SPVA would lapse.
The deadline for the registration of special purpose vehicles already lapsed in September this year but so far, the only NPAs that have been disposed of by banks were sold either to individuals or as settlement by dacion en pago.
Banks have been unable to actually sell their NPAs in bulk, as originally intended, because neither banks nor their buyers have been willing to take the haircut necessary for the deals to push through.
Nevertheless, the BSP said it was still processing applications from 19 banks planning to sell some P34.4-billion worth of NPAs in the coming six months.
According to BSP Deputy Governor Alberto V. Reyes, the BSP granted incentives to 18 banks under 68 certificates of eligibility (COEs) from 2002 to September 2004.
At the end of the SPV registration prescribed under the law, Reyes said a total of 36 SPVs have been registered with the Securities and Exchange Commission (SEC).
"This makes them eligible to acquire NPAs until April 28,2005," Reyes said. He said the number of registered SPVs was an indication that banks had serious plans to unload their NPAs under the SPVA.
According to Reyes, 16 out of the 36 registered SPVs were established by 10 banks. The rest were established by non-banking institutions and were equally eligible to acquire SPVs.
"This is why we are confident that we will still meet our target for the industry to unload at least P100 billion of their NPAs," Reyes said.
"This much NPAs would reduce the industry’s bad loans to about 10 to 11 percent of their total portfolio."
At present, the industry’s bad loans are equivalent to about 13.75 percent of total loan portfolio and the BSP’s target was to reduce it to at least 10 percent which was the ideal level considered "comfortable" based on international best practice.
Reyes reported that the COEs that have been issued so far involved the sale of Real and Other Properties Owned or Acquired (ROPOAs) of banks to individuals and settlement of non-performing loans by dacion en pago or payment in kind.
Ideally, the BSP wanted banks to unload their NPAs to SPVs in bulk at discounted prices. This way, banks would be able to reduce their individual NPL ratios dramatically.
Under the SPVA, banks were being encouraged to undertake these transactions by offering incentives ranging from tax exemptions to reduced registration and transfer fees.
Since banks would be selling their NPAs and NPLs at a discount, the losses the would incur from such sales could be booked over a longer period instead of taking a one-time hit.