Drilon pushes extension of SPV Act

Senate President Franklin Drilon has endorsed the extension of the Special Purpose Vehicle Act as a priority bill in cognizance of its benefit to the financial sector.

Drilon formally requested Senate ways and means committee chairman Ralph Recto, in a letter last Monday to prioritize consideration of the bills proposing the extension of Republic Act 9182 or the SPV Act.

"The Special Vehicle Act has facilitated the improvement of the asset quality of the banking sector as a substantial portion of the bad assets of banks have been unloaded using the special purpose vehicle framework," Drilon said in his letter.

Drilon pointed out that the SPV was one of the measures included in the Senate Priority Reform Agenda for the 13th Congress.

The SPV Act was signed into law in December 2002 but it was only in March the following year that the Congressional Oversight Committee came out with the implementing rules and regulations for the law.

Senate committee on banks, financial institutions and currencies chairman Edgardo Angara proposed the extension of the law as early as September last year with an explanation that the time consumed by the preparation of the IRR left the banks and financial institutions just a year to enjoy the privileges of the law.

The SPV Act, which expired last April, was crafted to encourage financial institutions to get rid of their non-performing assets (NPA) and generate liquidity that can be used to generate growth in the country.

NPAs consist of non-performing loans and assets obtained by foreclosure or dacion en pago or ROPOAs (Real and Other Property Owned or Acquired).

Drilon said he was encouraged by the report of the Bangko Sentral ng Pilipinas which noted that the bad loan ratio of commercial banks fell to single-digit levels for the first time in seven years mainly due to the SPV.

BSP Governor Amando Tetangco Jr. was recently quoted as saying that as of June 15, around P75 billion worth of NPAs had been approved for transfer.

Tetangco said that another P100 billion worth of bad assets could be unloaded by the banks with the extension of the SPV Act, thus reducing the ratio of bad loans to 7.5 percent of total loans.

In June, alone, non-performing loans (NPLs) sold through SPV deals amounted to P12.3 billion, trimming the sector’s total bad loans to P174.87 billion from P244.85 billion a year ago.

Total NPLs of banks were officially pegged at 16.27 percent or P300 billion of total loans in November 2002.