Congress starts probe of SPV operations

The House of Representatives is conducting an investigation into the operations and activities of a number of existing special purpose vehicles (SPV) and banking institutions.

The move is in line with the effective implementation of Republic Act 9182, also known as the SPV Act of 2002, and to determine whether or not there is still a need to further extend and amend the existing measure.

According to sources at the Lower House, a number of banking institutions has taken undue advantage of the law by creating SPVs and transferring their assets into these SPVs to take advantage of the tax perks provided by the law.

The sources said a number of these SPVs were mere dummies of banks and not really authentic SPVs, thus violating provisions of the Anti-Dummy Law. The Anti-Dummy Law limits the management, operation, administration and control of nationalized businesses or activities to Filipino citizens, one of which is owning land in the Philippines.

The SPV law was passed to encourage banks to dispose of their non-performing assets. The law, which provides tax perks to sellers and buyer of banks’ non-performing assets, expired in 2005 but was extended to this year.

At the beginning of the investigation by the House Committee on Banks and Financial Intermediaries last Tuesday, central bank officials said the SPV Law was able to address the difficulties encountered by the financial sector in the aftermath of the 1997 Asian crisis, particularly allowing financial institutions to get rid of their non-performing assets (NPAs) and thus create liquidity in the market.

Committee chairman Manila Rep. Jaime Lopez, for his part, expressed support for the law, saying many countries are adopting safety nets such as the SPV law amidst the snowballing economic crisis worldwide.  – Iris C. Gonzales