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SPV Law extension recommended |
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By FIL C. SIONIL
The Manila Bulletin 04/21/2005 The disposition of banks’ non-performing assets (NPAs), either through the special purpose vehicle (SPV) or public/retail auctions, may grind to a halt with the non-extension of the tax exempt privileges in the Republic Act 9182. Thus, extension of the law is needed. In a press conference, CB Richard Ellis Philippines, Inc. director for investment properties and capital markets Jojo Romarx Salas said there could be a slowdown in the sale of banks’ NPAs should the lawmakers decline request for the extension of the SPV law incentives. These incentives, specifically the tax exemptions, one of the sunset provisions in the law, reduce the cost to the selling institution, making the disposition of the NPAs, at a discount, more bearable. "The extension would allow more deals," Salas believed. Prodded to provide figures, Salas estimated that an additional P20-billion worth of NPAs, composed of both loans that has turned sour and real properties owned and acquired (ROPOAs), could be disposed. Otherwise, Salas lamented that only 25 percent or P120 billion out of the estimated P500-billion worth of NPAs outstanding as of end 2004 would have been sold. Of this about P100 billion worth of transaction is still awaiting approval from the regulators. Under the sunset provision of RA 9182, banks have until September 18, 2005 to enter into a joint venture undertaking with a third party to set-up a SPV, an avenue for the institutions to sell down its NPAs at a discount. In order to prevent any possible abuse, the lawmakers introduced a sunset provision for banks to avail of the tax incentives, limiting it only to until September next year. NPAs refer to the banks’ combined level of non-performing loans and real properties-owned or acquired assets. According to Salas, CB Richard Ellis has projected a "declining" ratio for loans that has turned sour, but, refused to provide any additional data or figure to justify the assumption. SPV Law extension recommended Despite the uncertainty on whether or not the sunset provisions of the law will be extended, the firm believed the adoption of the law was a success, considering the reduction in the level of NPAs of the banking system without financial bail-out or assistance from the government. "We saw the banks acting in concert with the Bangko Sentral ng Pilipinas to address the issue of non-performing assets, in particular, and liquidity, in general. More importantly we saw the private sector and foreign institutions participating in acquiring these non-performing assets," the firm’s statement said. It stressed that the reduction was completed with "no cash outlay from the national government while liquidity problem is being solved. The Bankers Association of the Philippines (BAP) has already sought for the extension the sunset provision in the SPV for banks to fully avail of the tax and incentive privileges. Banks under the law can clean their balance sheet peppered with NPAs, either through direct sale or transfer, at a discount, to an asset management firm, which they can own up to five percent equity. The SPV Law, which was passed in 2002 and took effect April 2003, granted banks, at a limited timeframe, exemptions from the documentary stamp tax, capital gains tax and the 10 percent value-added tax plus a 50 percent reduction in fees on the sale or transfer of their assets. |
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