Law seeks to free banks of past due loans worth P200-B

President Gloria Arroyo on Tuesday signed into law Republic Act 9343, which seeks to free banks from more than P200 billion in bad loans through the creation of special purpose vehicles (SPVs). The new law amends RA 9182 or the Special Purpose Vehicle Act of 2002. The two-year lifespan of the SPVs registered under RA 9182 has expired. Sen. Ralph Recto, Senate ways and means chairman, said there is still more than P200 billion worth of non-performing assets (NPAs) in the banking system. “The target is to reduce it further by P200 billion. That will reduce the NPA ratio to six percent so that would be more or less a regional average," he said. Before the enactment of the original SPV Act, bad loans comprised nearly 20 percent of total banking assets. President Arroyo said in 2003 that the amount of NPAs that went sour after the Asian crisis is more than P300 billion in bad loans and more than P200 billion in repossessed assets. Under RA 9343, SPVs can be established and registered within 18 months after the new law takes effect, which is 15 days after publication in a newspaper. The SPV is given a two-year lifespan. The law also extends the tax benefits by another two years. This includes the exemption of the transfer of NPAs from a financial institution to an SPV and from an SPV to a third party from documentary stamp tax, capital gains tax, creditable withholding taxes, and value added tax or gross receipts tax whichever is applicable. The law provides that the transfer will be subject to: 50 percent of the applicable mortgage registration and transfer fees on the transfer of real estate mortgage and chattel mortgage registrations to and from the SPV, 50 percent of the filing fees for foreclosure initiated by the SPV in relation to any NPA acquired from a financial institution, and 50 percent of land registration fees. The signing ceremony was held at the trading floor of the Philippine Stock Exchange shortly before Mrs. Arroyo rang the trading bell. The ringing was only ceremonial because Arroyo came earlier than the 9:30 a.m. trading time. Recto added that the only priority bills still pending in his committee are the rationalization of fiscal incentives law, anti-smuggling bill, and the rationalization of income tax. -GMANews.TV