SPAV bill has flaws — Padilla

The pet bill of Speaker Jose de Venecia creating a Special Purpose Asset Vehicle (SPAV) to help banks recover from the mire of idle assets and uncollected debts contains provisions that are inimical to public interest.

This was declared by House Minority Leader Carlos Padilla, who wants the bill refered back to the committee on banks and financial intermediaries to clarify certain provisions as well as make it more protective of the whole banking sector, including depositors.

HB 4403, an act authorizing the creation of Special Purpose Vehicles to allow investment in, and acquisition of non-performing assets (NPAs), as well other purposes, was approved on second reading Tuesday night.

Padilla said the banking sector, though plagued with NPAs, is still making money unlike other sectors of the economy like the exporters and coconut farmers.

"No matter how small the net profit, they (banks) are still earning. Why rescue a sector that is not sick?" Padilla asked.

He added that members of the House should, instead, focus on bills that would help sectors that are really suffering from the effects of the global recession.

He also said that most banks which went bankrupt were because of poor banking practices and weak management.

"There have yet to be, in most recent times, banks that went bankrupt because of economic crisis. No one in the banking sector is falling down despite the existence of NPAs," Padilla said.

Quoting a position paper submitted by the National Tax Research Center, Padilla said, the SPAV bill will eventually set precedence to other sectors experiencing similar situations.

The position paper mentioned that banks incur large amount of NPAs, which include NPLs (non-performing loans) and ROPOAs (Real and Other Properties Owned and Acquired) because they violated safe and sound banking practices.

According to the House committee on banks which considered and recommended for approval HB 4403, there are a total of P486 billion NPAs, of which P296 billion are NPLs and P190 billion are REPOAs.

"The bill would not cure the problem. It does not answer the question why there are NPAs, the bill only provides ways for the banks to get rid of their NPAs. We have no solution that would prevent NPAs from recurring," Padilla said.

He stressed that the banking sector has yet to fully tap its resources. At present, the focus are on NPAs and getting rid of them to make banks liquid.

But, Padilla said, banks want to get rid of their NPAs because the BSP is sanctioning them because of the NPAs they incur.

"Pag nawala ang NPAs sa kanila, guwapo ang bangko. Masidhi ang layunin ng mga bangko na mawala ang kanilang NPAs dahil nakatali dyan ang portion ng kanilang capital under this bill, we would legitimize the removal of NPAs," Padilla said.