SPVA seen to spur sale of P82-B bad assets

The extended Special Purpose Vehicles Act (SPVA) is expected to spur the disposition of about P82 billion worth of bad assets, significantly less than the P100-billion target of the Bangko Sentral ng Pilipinas (BSP).

According to BSP Governor Amando M. Tetangco Jr., the latest available data at the BSP indicated that 27 banks have expressed interest to dispose of some P82.1 billion worth of non-performing assets (NPAs) under the extended SPVA.

The BSP had originally estimated that the extension of the original SPVA would remove an additional P100 billion worth of bad assets from the portfolio of banks.

According to Tetangco, however, the latest data indicated about P18 billion less than expected.

Out of the P82.1 billion that banks said they intend to unload under the extended SPVA, Tetangco said about P29 billion are already qualified as eligible for incentives provided under the SPVA.

According to Tetangco, another P10 billion worth of bad assets are being applied for incentives and the issuance of certificates of eligibility or COEs.

Under the original SPVA, Tetangco said banks disposed of about P96.7 billion worth of bad assets, representing about 19 percent of some P500 billion worth of NPAs that are eligible for sale with incentives.

The BSP had conducted a survey of banks where they were asked exactly how much NPAs they intend to unload under the SPVA this year. These were assets that have been earmarked for unloading though not applied for incentives.

Despite criticisms, however, the BSP said they are more than satisfied with the progress being made by banks in cleaning up their loan portfolio.

The BSP said it was understandable for Philippine banks to take longer to recover from the 1997 Asian crisis especially since, unlike other countries, the government did not take a direct hand in rescuing the banking industry.

“Our government does not have the resources to take a direct bail-out of banks so our banks have had to do this all on their own, often from internally-generated funds,” Tetangco said earlier.

Tetangco said banks have had to contend with the capital impact of cleaning up their loan portfolio while at the same time building up capital to deal with the impact of complying with the provisions of the Basel II Convention.

“We have to appreciate the magnitude of the effort that the industry has been exerting,” said BSP Deputy Governor Ernesto Espenilla Jr. “They have undertaken an overall clean-up and increase in provisioning, building up capital from internally-generated funds.”