Good morning. 

Republic Act 9182 or the Special Purpose Vehicle Act of 2002 was packed with good intentions: it sought to save the banking sector from the financial fallout of lending decisions that went sour after the Asian Financial crisis and it also allowed banks to charge their losses against their taxes to lessen their burden.

The SPV law was passed with the end view of bringing in new money to revive bad loans, find new uses for foreclosed assets, rehabilitate failed businesses, and open wide the lending windows again. 

This has been possible as the law set out the legal, regulatory and taxation framework for banks and other financial institutions to sell non-performing and acquired assets. It also helped institutions securitize their assets by granting tax incentives to asset management companies or special purpose vehicles. 

In April 2006, the SPV law was amended after the Special Purpose Vehicle Amendatory Act or Republic Act 9343 was signed into law. The new law extended the deadline for the establishment and registration of special purpose vehicles and the availability of tax incentives up to January 27 2008.

Consequently, several corporations were created as SPVs to avail of tax exemptions and privileges as provided under the law.  

With the reports that some SPVs have allegedly entered in transfers not in the concept of a true sale, the good intentions of the law were abused by financial institutions which sanitized their balance sheets through fictitious transfers of NPAs which of course deprived the government of taxes which would have been collected from said transfers. 

Equally disturbing is the manner by which unscrupulous financing institutions have distorted the provisions of the law to circumvent the anti-dummy law and even the prohibition on foreign ownership of land. 

These reports led this representation, together with Representative Chipeco of Laguna, to subject the issue to a congressional inquiry to: First, determine whether there is still a need to extend and/or amend the SPV law especially in the light of the present global financial crisis; Second, to identify remedial measures to rectify errors and lapses to make more efficient and effective the governing laws that mandate the establishment of SPVs; Third, to look at how regulatory institutions involve in regulating SPVs can be adequately empowered to regulate SPVs and prevent the anomalies being reported; and Fourth, legislate measures that would address unexpected consequences of the law especially the circumvention of the anti-dummy law and the ban on foreign ownership of land in the Philippines.  

As we start with our first hearing on the issue today, it is our hope that all the invited stakeholders and experts share the intent of the authors of this Resolution to strengthen the fiscal and banking policies of our country to better serve the Filipino people.    

Thank you.