An inquiry into the profitability of selected universal banks before and after the implementation of Special Purpose Vehicle Law

• Main Authors: Balajadia, Aileen, Buenventura, Katherine, Cuadra, Zecel Nharlette
• Format: text
• Language: English
• Published: Animo Repository 2006
• Subjects: Banks and banking > Philippines; Finance and Financial Management
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/6298
• Institution: De La Salle University

As the Philippine financial system hangs on the verge of collapse due to the increasing level of non-performing assets wherein the quality and quantity of bank's earnings suffer, the country was left to seek radical solution that could help alleviate problem. This paved way for the government to pass the Special Purpose Vehicle (SPV) Law, by which special purpose vehicles, otherwise know as asset management companies, were established. The essence of the law was to failitate the transfer of those assets from a bank to third parties consequently, banks are expected to become liquid and are encouraged to lend again. It has been three years (3) since the law was implimented way back in 2003, criticisms accompanied the SVP Law, and argued that its effectiveness is reliant on institutional factors such as improved insolvency rules and procedures. The researchers believe that by identifying the problems encounterd in the disposition of non-performing assets by the banks, the overall performance can be fairly assessed. Moreover, this study reflects the impact of the SPV Law on the level of non-performing assets of the banking industry and its effect on the profitability of selected universal banks. Such was achieved through the use of statistical tools in order to analyze the relationship and determine the significant difference in the bank's profitability considering the period before and after the SPV Law. Pearson product moment coefficient and T-test were primary tools utilized. The results were then validated, implying that there are enough evidence to provide adequate conclusions and recommendations.