CAMACHO TOLD BANKS TO SELL BAD ASSETS (NPLs) FAST

MANILA, OCTOBER 8, 2003  (MALAYA) By PEARL O. BANTILLO - Finance Secretary Jose Isidro Camacho yesterday called on local banks to speed up the sale of bad assets since the incentives that they can avail of in cleaning their balance sheets are good only for two years.

Banks can unload their soured assets to special purpose vehicles (SPVs) at lower friction cost-lower tax in transferring assets.

The "sunset" provision in the law, he said, emphasizes the urgency needed in solving the NPL problem of banks.

(Please see related story next page on Moody's outlook for banks).

Camacho at the sidelights of the 20th Asian Bankers Association General Meeting and Seminar said that while banks are going the SPV way, the pace is still sluggish.

Five months after the implementing rules of the SPV Act were issued, no SPV deal has been completed yet.

Multilateral institutions such as the Asian Development Bank and the International Finance Corp. have even indicated a strong interest to provide funding for SPV activities in the country.

The banks, however, remain concerned over the huge haircut they would incur if they sell the assets to SPVs.

"There is still much to be done in this regard to encourage more domestic banks to bite the bullet, mark to market and absorb the losses. Time occasionally heals the wounds of a bad loan but time is not on our side especially in globally competitive environment,"

Camacho said in a speech before ABA members.

"Biting the bullet is a difficult thing to do. We have to allow the economic process between buyers and sellers to take place," he said.

One thing the national government could not provide is financial assistance. Camacho said the Philippine government, unlike its counterparts in the region, could not afford to bail out the banks.

"The government will not buy the bad assets of banks.

We don't have the financial resources to do that," he said.

With still ample time to go before the incentives expire, Camacho said there is yet no reason to worry.

The leading proponents of SPVs in the Philippines are US-based Cerberus Capital and Lehman Brothers with a commitment to invest up to $1 billion each into the country two years ago.


Reported by: Sol Jose Vanzi

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