The Bangko Sentral ng Pilipinas has allowed banks to book all the remaining losses they incurred from the sale of non-performing assets they acquired following the Asian financial crisis.
In its latest memorandum to banks, the BSP said banks now have the leeway to make a one-time charge of all their remaining losses from NPA sales to their retained earnings.
Under the Special Purpose Vehicle Act (SPAV law)—which was implemented from 2002 to 2005 and then extended to 2008—banks were allowed to book on a staggered basis their losses from sale of NPAs. The losses from sale of NPAs were also allowed to be deducted from the retained earnings of banks instead of being directly booked as part of their net losses.
The intention of the law was to help banks recuperate from the adverse effects of the 1997 Asian financial crisis, which led to banking-sector failures in many Asian countries, including the Philippines.
The law likewise granted tax perks to special purpose vehicles, or entities that bought non-performing loans and other types of NPAs of banks at steep discounts.