Purisima backs bill extending life of SPV Act

Finance Secretary Cesar V. Purisima is supporting the proposed bill calling for the extension of the Special Purpose Vehicles Act (SPVA) to one-and-a-half years.

"The Department of Finance (DOF) is extending by another 18 months the period by which an SPV may register with the Securities and Exchange Commission (SEC) and another two years from the effectivity of the amended bill, the entitlement of tax exemptions and fee privileges of all sales of transfer of non-performing assets (NPAs) to the SPVs," Purisima said.

Purisima added that the DOF is also agreeable to stretching the coverage of these assets that have become NPAs from the original cut off of June 30, 2002 to Dec. 31, 2004.

The DOF stressed that qualified NPAs should be confined to loans already deemed outstanding as of the date of the original law which was in 2002.

"We want to emphasize that the SPV route should be looked at as a one-time opportunity to fix the non-performing loan problems and not as a quick fix tool that can be tapped to address the NPAs of banks from time to time," Purisima said.

Recently, the Bangko Sentral ng Pilipinas (BSP) which also endorsed the clamor by banks to extend the SPVA, said it wants to qualify more NPAs that could avail of incentives under the law.

The BSP asked Congress not only to extend the effectivity of SPVA incentives but also to move the cut-off due for qualified NPAs in order to accommodate newer NPAs for incentives.

Under the existing provisions of the SPVA, the incentives for all NPAs sold by banks and other financial institutions expired last April and the BSP wants to extend these perks for two more years to give banks more time to clean up their portfolio.

The BSP has to date recorded about P90 billion worth of NPAs sold under the SPVA, including NPLs of banks.

The BSP already eased its implementing rules for the SPVA incentives and gave banks, among other things, longer time to book their losses when they sell their bad loans and bad assets to asset management companies.

Currently, the universal and commercial banking industry alone had about P254.513 billion in NPLs, accounting for over 15 percent of the industry’s total loan portfolio, a ratio that was way above the international norm of 10 percent and below.

Under the amended provision of the internal rules and regulations, banks now have 10 instead of only seven years to book the losses they would incur when they sell their NPL or NPA portfolio to interested special purpose vehicles.