The Bangko Sentral ng Pilipinas (BSP) said it was giving banks a 30-day grace period to file applications for incentives after the expiration of the extended Special Purpose Vehicles Act (SPVA).
The BSP said over the weekend that banks would be given until June 13 this year to file their applications for transactions completed on or before May 14, the date when the SPVA perks were scheduled to lapse.
BSP Deputy Governor Nestor Espenilla Jr. told reporters over the weekend that the Monetary Board had decided to grant the grace period like it did when the original SPVA law expired.
Espenilla explained that based on the BSP’s experience with the first SPVA law, banks piled up last-minute applications on the last six and especially the final three months before the law expired.
“We decided to give banks a 30-day window to submit all the documentations on their SPVA transactions,” Espenilla said. “But we’re giving banks this window on one important condition.”
According to Espenilla, the basic transfer documents such as purchase agreements, asset sale or dacion en pago should have already been notarized on or before the May 14th deadline.
“If they have these documents already notarized by May 14, then they have until June 13 to give us all the documentations for processing,” Espenilla said.
“However, even if they already have these documents available and already notarized by May 14, we will no longer accept them if they are submitted to us after June 13,” he said.
Espenilla said the amount of SPVA transactions have so far not moved from the most recent data but said there were qualitative differences between the availment of incentives under SPVA 1 and SPVA 2.
According to Espenilla, SPVA 1 sales were predominated by universal and commercial banks that had significant amounts of non-performing assets in their portfolio.
This time around, Espenilla said more thrift and rural banks were availing of the incentives under SPVA 2, unloading bad assets to take advantage of the perks that range from tax incentives to special accounting privileges.
Espenilla said, however, that the BSP expected more banks to take up joint ventures with property developers instead of selling their bad assets at a discount under the SPVA.
Although over P100 billion worth of bad assets have been unloaded so far under the SPVA, the banking industry is still saddled by over P220 billion worth of non-performing assets.
According to the BSP, however, the upside in the property sector was giving banks the rare opportunity to turn these assets around instead of selling them at a loss to asset management companies.
Espenilla told reporters over the weekend that banks were increasingly developing a preference towards entering into joint venture agreements with property developers to turn around foreclosed properties.
Since it allowed banks to form joint ventures with property firms, the BSP has so far approved two major joint ventures between banks and property development firms worth P2.5 billion. Similar transactions worth P3.5 billion are pending for approval.
According to Espenilla, the BSP expected an increase in these joint ventures as banks move to take advantage of opening opportunities in the real estate market.
“Banks are less inclined to take a discount and more inclined to take advantage of the upside in the real estate sector,” he said.