 |
|
SPV
law flops When a law – one that – flops, nobody seems to care, not even the intended beneficiaries. The Special Purpose Vehicle (SPV) law, passed in 2002 after much haggling between legislators and the banking industry, was intended to free up some P450 billion of foreclosed properties, equivalent to more than a quarter of the industry’s total asset base. A critical milestone in the law’s statutes was basically ignored last Sept. 18 when investors (and banks), who were supposed to take advantage of the new law’s liberal incentives, did not bite. All that time and money spent on crafting the law seems to just have been wasted. Banks apparently are not worrying that they have so much money tied up in idle and non-performing assets, including bad loans. On second thought, why should they? After all, they don’t need to sell their bad assets because there is hardly anyone who wants to borrow money, with the economy almost at a standstill. Even if eventually the SPV law virtually gave everything that banks were asking, in the end, the banks were not that enthused to take advantage of all the perks. Only BSP is worried I guess the only one left worrying is the central bank, which had always been keen on keeping the ratio of banks’ non-moving assets and bad loans to a manageable percentage of the industry asset base. Bangko Sentral ng Pilipinas Governor Rafael Buenaventura had cautioned that the banking industry would have a difficult time if it allowed the SPV law to lapse. But that warning is falling on deaf ears. Even if the banks’ inability to sell bulk of their bad assets has reportedly already affected their profitability and started to eat up on their capital, banks are instead just raising Tier 2 capital – or subordinated debts that could form part of capital but does not erode shareholders’ value – rather than let go of the bad assets. "You can lead a horse to water, but you can’t make it drink. But if it refuses to drink, at one point, it will die of thirst," Buenaventura once had said, an acknowledgement that the rest is up to banks. But banks should not come crying back if the law lapses, he warned. The economy is the biggest loser here because all that money, if freed, could have supported the expansion of companies that could create more jobs for a greater number of people, and in the process help the country. Well, that’s how the whole thing is supposed to work, at least in principle. On the other hand, if banks don’t want to be saved, then let them pay for their own actions. After all, the accumulated amount of non-performing assets is a reflection of banks’ indiscretion, failures, and excesses in doing business during the last decade. No extensions, please Now, the banks are asking for an extension of the law’s effectivity by two more years. Since the passage of the law in December 2002, banks have continued to push for more perks that were eventually granted by the more accommodative central bank. Among the additional concessions that banks received included longer time to book losses incurred from the asset sale, from the original seven years under the law to 10 years. The central bank also allowed banks to retain the loan loss provisions on NPAs sold and to apply these as specific or general provisions for the remaining assets of the bank so as to keep banks’ balance sheets stronger. Banks were also permitted to own a stake in the SPVs, contrary to the original proposal. This would have allowed banks to earn some more once the SPVs were able to sell the banks’ assets. These incentives are on top of the breaks given on capital gains, documentary stamp and value-added taxes on all assets disposed all the way from banks to SPV to third party. What the banks asked, the central bank gave. In the end, however, the industry played coy and hardly moved. It looks like the government is being taken for a ride. Perhaps, it is time to say no. Squabbling PR practitioners More and more, we are seeing organizations involved in intra-board struggles – Baguio Country Club, Manila Polo Club, and just recently, the Public Relations Society of the Philippines, an organization of about a hundred public relations practitioners. The fundamental issue is about keeping control of the organization – and its funds, of course. What is ironical is that the Securities and Exchange Commission is often powerless to mediate, especially when a party starts invoking the new Securities Act that has transferred jurisdiction of most corporate cases to the regional trial courts where cases are usually stymied by flurry of motions and counter-motions. Squabbling in PRSP reportedly turning serious as the previous board, apparently already hobbled since seven of its nine members had earlier resigned, is contesting an election called by a so-called convenors’ group composed of the society’s elders including PR stalwarts Max Edralin, Elpi Cuna, Gen. Honesto Isleta, Charlie Agatep, and Virgilio Pantaleon. I understand that majority of the members have refused to pay their dues to the old leadership. And that, more than two-thirds of them came and voted for a new board under the leadership of Globe’s Jones Campos. However, PLDT’s Evelyn del Rosario, a member of the old board, is claiming that the election conducted by the convenors‚ group and supervised by SEC is null and void. Rumor is that the PLDT executive had been trying to prevent Campos from assuming the board presidency for over three years already. This now sounds like a telecommunications industry war but staged in the PR arena. Being PR professionals and practitioners, I am sure the members are realizing the situation in the PR society is bad PR. ‘Breaking Barriers’ with Michael Kho, GM, Duty Free Philippines ‘Breaking Barriers’ on IBC-TV13 (11 p.m. every Wednesday) will feature Michael Christian Kho, Duty Free Philippines general manager, on Wednesday, 6th October 2004. After losing more than P2 billon in four years, from 1997 to 2000, the relevance of Duty Free Philippines was put to question. Instead of providing much needed funds for the government’s tourist development projects, it became an additional drain to government finances. But the business is now generating positive results. However, new concerns are being raised as to the adequacy of its contribution and whether it will withstand competition under an increasingly liberalized trading environment where tariff barriers are being phased out. Is the Duty Free operations still a relevant factor in promoting tourism? Will it continue to contribute to the funding of tourism projects? Is the business of Duty Free affected by rampant smuggling? Watch it. Transport issues on TV ‘Isyung Kalakalan at Iba Pa’ on IBC-TV 13 News (5 p.m., Monday to Friday) ends today a discussion of the government’s attempts to rationalize the commuter transport system within Metro Manila and that which links the metropolis to the highly populated areas in the northern and southern sections of Luzon. Being pursued are the construction of several new elevated light rail transit lines and the North Rail train system that will be expected to ease vehicular traffic congestion in Metro Manila. All of these are grand plans. But are they realistic given the huge cost of these projects and the government’s financial predicament? Watch it. Should you wish to share any insights, write me at Link Edge, 4th Floor, 156 Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at reygamboa@linkedge.biz. If you wish to view the previous columns, you may visit my website at http://bizlinks.linkedge.biz.
| |||
|