Philippine President Gloria Macapagal Arroyo signed into law on Monday a measure reviving tax breaks for buyers of banks' soured assets for two years, a move which officials hope will spur more sales of bad loans.
Arroyo signed the law amending the Special Purpose Vehicle (SPV) Act at the Philippine Stock Exchange amid cheers from lawmakers, government officials and businesspeople before ringing the opening bell to start the day's trading
The ceremony was similar to December 2002, when she signed the original law on the stock exchange's trading floor.
The central bank has said it expects commercial banks to sell about $2 billion worth of bad loans over the next two years. About 95-100 billion pesos ($1.84-$1.94 billion) worth of bad loans were cleared from banks' books before the original law expired in April 2005, the central bank had said.
Officials have said that if all soured assets were unloaded, banks' non-performing loan (NPL) ratio should fall from around 8.3 percent of total loans to 6.5 percent, although that would still be higher than the 4 percent before Asia's financial crisis of 1997-98.
Under the amended law, the deadline for the creation of asset management firms entitled to tax breaks will be 18 months from when it takes effect, which is expected shortly. The original deadline was September 19, 2004.