Philippine ABS bill moves closer to fruition

2002 will be the year when securitization starts to bloom in the Philippines. Oh yes.

Securitization sceptics may well sneer at this statement, but a securitization bill will be passed into law in the Philippines in 2002. And the likelihood is that it will happen by June at the very latest.

For those not in the know, talk about developing the asset-backed securitization (ABS) market in the Philippines has been, perhaps cruelly, a bit of a joke among professionals at western investment banks in the region.

Even when the names of the institutions they worked for were linked with deals - for assets ranging from gambling receipts to natural gas revenues - the same ABS bankers would laugh off these rumours, saying that an insufficient legal and regulatory framework would make any attempt to bring transactions to market nigh on impossible.

However, when Gloria Arroyo came to power last July there were signs that her administration saw securitization as a vital part of its future economic strategy when the new President included the topic in her first State of the Nation address.

Since that address, a draft bill - which had been over two years in the making - was sent to members of Congress, the Department of Finance and other government agencies with all parties coming together to try and finalize the details.

At the moment the bill is being slightly revised at the technical working group level of the House of Representatives (the lower level of Congress), to take into account the various comments made since the draft bill was sent to all interested parties last year.

When the Senate re-opened for business last week, Senate President Franklin Drilon said there was a determination to speed up the passage of a number of key measures, including the securitization law.

"At the Senate, the first briefing of the securitization bill, as well as all the other bills filed, commenced earlier this week," one observer comments. "From all indications, and based on the pronouncements of the legislative leaders, a securitization bill will be passed soon. I would say the best-case scenario for this happening will be March, but failing that it will definitely not happen later than June.

While that may not be enough in itself to convince sceptics of the desire to promote ABS in the Philippines, a recent development involving Lehman Brothers may help sway those negative souls.

Last week, a MOU was signed between the bank and the Department of Finance for the establishment of a $1 billion recovery fund to help finance housing projects for the masses, the purchase of non-performing loans and the securitization of performing assets, including residential mortgages and government royalties.

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