 |
 |
|
|
       |
BSP issues new guidelines allowing banks to form joint ventures with property developers |
|
By Des Ferriols
The Philippine Star 03/07/2006 The Bangko Sentral ng Pilipinas (BSP) want banks to join up with property developers to help ease the burden of some P220 billion worth of foreclosed real estate assets weighing down the banking industry. The BSP’s Monetary Board (MB) issued its new guidelines yesterday allowing banks to form joint venture agreements with property developers but only under very restricted conditions. The guidelines drew the parameters for joint venture agreements between banks and real estate development companies that require, among others, prior approval by the MB. Under the approved guidelines, the BSP said banks are allowed to enter into joint venture agreements with real estate development companies to develop foreclosed real estate assets that were otherwise congesting banks’ books as non-performing assets (NPAs). The BSP said bank regulators want banks to have the option of joining up with property developers to revive assets classified as real and other properties acquired through foreclosure or "dacion en pago" in settlement of loans and other advances (ROPAs). According to BSP Governor Amando M. Tetangco Jr., the guidelines also covered properties acquired as a consequence of their bank mergers/consolidations with other financial institutions. "The purpose of the property development may either be for their immediate sale or conversion into earning assets," Tetangco said. Tetangco said the decision of the MB was aimed at encouraging and helping banks to dispose of their holdings of non-performing assets (NPAs). "Preliminary reports indicate that the aggregate level of ROPAs in the banking system was already over P221 billion as of Dec. 31, 2005," he said. Banks could go into joint venture agreements with property developers but Tetangco said the BSP was placing prudential limits to prevent abuse. For starters, Tetangco said such joint venture agreements would require prior approval of the MB and banks would be allowed to contribute to the venture only to the extent of their ROPAs and properties acquired as a consequence of mergers/consolidation which are no longer necessary in their operations. According to Tetangco, banks are prohibited from providing funds to the joint venture either as a loan or capital contribution and they were further prohibited from recognizing income out of the properties it contributed to the joint venture regardless of the agreed valuation of said properties in the JVA. "They are only allowed to recognize income upon receipt of the proceeds from the sale of the developed properties," he said. As an additional means to ease the burden of ROPAs on the operations of banks, the MB also authorized banks to invest in the equities of companies engaged in real estate development as a non-financial allied undertaking, provided that such investments are also limited to ROPAs and other properties acquired as a consequence of mergers/consolidations. However, if the investee corporation was an existing subsidiary or affiliate of the bank, the BSP said the latter would not be allowed to recognize income out of its investment regardless of the agreed upon valuation. |
 |
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 |
