"(A new law) will ensure that the banking industry will offload at least P100 billion more of bad assets," Tetangco told a press briefing yesterday. The bill has been pending approval for a year because Congress had all its attention on the new value-added tax law, which they finally passed last July.

Tetangco said the SPV Law is delayed because some lawmen consider it as a revenue bill due to its tax contents. "But it has been approved by the Lower House and is now on its third reading."

With SPV, the BSP chief is hoping to slash the banks’ total non-performing assets by P100 billion more, which would further bring down the NPL ratio to seven percent from the present 9.5 percent. "The 7 percent NPL ratio is a pre1997 level," he said.

The BSP said extending incentives allowed under the SPV law, which expired last April 8 — for two years more should give banks enough time to sell soured assets or loans.

As it is, the central bank missed its P100 billion target for this year by P3 billion. The banking sector unloaded P97 billion of its bad assets through SPVs as of last tally.

The SPV law was enacted in 2002 to help banks dispose of P601.5 billionworth of NPAs and the BSP is helping the sector liquidate idle assets.

Member banks of the Bankers Association of the Philippines has been urging Congress to approve the extension since keeping their NPAs on their books is eroding their profits or earnings.

The SPV law extension is contained in House Bills 2311 and 3058. The bills are seeking to amend Section 6 of the law, which is the period of SPV application and registration. Section 15 of the SPV or tax exemptions and privileges and Section 26, or the cutoff date for bad assets eligible under SPV are also the changes that will be deliberated on.

The SPV Act is intended to help banks dispose their NPAs by granting tax exemptions and reduced registration and transfer fees. SPVs buy non-performing assets at substantial discounts, turn them around, and then sell them once the market has recovered.

The BSP have issued circulars that would provide regulatory relief to banks that qualify for privileges under the SPV Act. The circular essentially aims to ease the pain of banks in having to recognize potentially large losses resulting from the sale of NPAs at deep discounts.