A MEASURE providing for the establishment and regulation of special purpose vehicles (SPVs) that will acquire bad loans from financial institutions has been filed in the Senate.
Senate Bill No. 1652, the “Special Purpose Vehicle Act of 2020,” seeks to provide a legal framework for asset management companies for buying or investing in non-performing assets (NPAs).
The bill was filed in anticipation of the increase in bad loans in light of the Luzon-wide lockdown that led businesses to shut down operations.
“The economic uncertainty brought about by the pandemic may soon take a hit on every balance sheet of businesses and enterprises that may result in their inability to pay bank loans,” Senator Ralph G. Recto said in the explanatory note.
President Rodrigo R. Duterte imposed a lockdown in mid-March to help contain the spread of the coronavirus disease 2019 (COVID-19), suspending work, classes and public transportation.
Mr. Recto noted the bill is similar to the Republic Act No. 9182, the SPV Act, signed in 2002 to address the impact of the 1997 Asian financial crisis.
The measure is also similar to the proposed Financial Institution Strategic Transfer Bill that was among the priorities Mr. Duterte identified his fifth State of the Nation Address. Its counterpart, House Bill No. 6816, obtained final approval from the House of Representatives ahead of the June 5 adjournment.
The two bills allow SPVs, which are private-sector owned AMCs, to invest in or acquire NPAs, or engage third parties for its management, operation, collection and disposal among others.
“This will improve the liquidity condition of the banks and other financial institutions,” Mr. Recto said.
“On the other hand, the SPVs will be afforded an opportunity to reap profits from the subsequent disposition of valuable NPAs which are usually acquired at a discounted price.”
The measure will also provide incentives, such as tax exemptions and fee privileges, to encourage businesses to establish SPVs.
This includes exemption from the documentary stamp tax, capital gains tax, income tax and value-added tax on the transfer of assets. The transfer will also be subject to 50% of applicable registration and transfer fees, filing fees for foreclosure, and land registration fees. — Charmaine A. Tadalan