 |
 |
|
|
       |
Chicken or egg situation for SPVs |
|
By Robert JA Basilio Jr. , Senior Reporter
The Manila Times,Tuesday, August 03, 2004 (First of two parts) THE apparent lack of investor interest in forming special purpose vehicles, or entities which help banks dispose of their nonperforming assets, can be explained by using the chicken or egg conundrum. Or at least according to Ronaldo del Rosario, chief finance officer of First Sovereign Funds Corp., one of six SPVs established in the country so far, after the enactment of the 2002 SPV law. Designed to encourage the establishment of SPVs in the country, the law provides generous tax incentives and reduced asset registration and transfer fees by 50 percent, including waivers for documentary, capital gains and expanded value-added taxes, but only if SPVs avail of them on or before September 18, which is less than 2 months from now. Such is the priority given to SPVs that the Securities and Exchange Commission has even set up a one-day express lane for investors who wish to form their own SPVs. At the moment, Philippine banks have nonperforming assests (NPA) or bad assets worth more than P400 billion, with 80 percent belonging to universal and commercial banks alone. Virtually all of these NPAs meanwhile are primarily real-estate properties, the remnants of the 1997 Asian financial crisis. If these NPAs are not turned into cash, they will not only threaten banking stability, they will also compromise their lending capacities. Banks, after all, are not in the business of making money through real-estate. Weak lending capacities will in turn, lead to scarce capital which will cripple business expansion and further discourage entrepreneurship, two significant economic activities that create jobs. Unfortunately, even with generous incentives, reduced fees and an impending deadline, not every foreign institutional investor is lining up to establish an SPV, also known as an asset management company. “Clearly, it’s a chicken-and-egg situation,” del Rosario told The Manila Times. He said that while local financial institutions are eagerly awaiting the formation of SPVs to which they can sell their bad assets, foreign institutional investors—parties which have the financial resources to form SPVs—are waiting for the list of banks’ bad assets for them to bid on. After all, the law also allows groups or individual investors to acquire bad assets, either through auctions or negotiated sales, before forming their respective SPVs. Recently, the Bank of the Philippine Islands was able to sell off P8.6-billion worth of bad assets to a foreign investor, one of the very first successful bad-asset bulk sales the country has ever seen. On the other hand, while the senior management of the United Coconut Planters Bank has been actively pushing for the disposal of their bad assets through an auction, the transaction was called off due to the failure of SPVs to comply with documentary requirements. A new auction meanwhile, will be held in mid-August. Del Rosario also said that the constitutional prohibition banning foreigners from owning land in the country may also be a reason for foreign investors’ lack of interest in buying local banks’ bad assets. He said that Thailand, Taiwan and Korea had similar prohibitions like the Philippines. But when they passed their respective versions of their SPV laws and then allowed foreign nationals to own land, foreign investment surged. While del Rosario emphasized that this was not a major obstacle in terms of the SPV law, he nevertheless wished that the foreigners be given permission to own property, even in a limited capacity, especially those which are in the process of being disposed. “This is not because foreigners want to own land in the country but because they want to take control of their investments,” del Rosario said. |
 |
Circular Letters/Memoranda |
|
Speeches/ Presentations |
|
Photo Gallery |
|
The 2008 RBAP Charter Symposium |
|
2008 CFI Awards |
|
Rural Banking Week Celebration Golf Tournament |
|
Client Satisfaction Survey for Licensing Management System of the Supervision and Examination Sector |
|
Financial Reporting Package 2008 |
|
BSP releases regulations on liquidity, market risk weighting |
