to prior bsp approval. moreover, we have also started revitalizing the trust business to widen investor base with the gradual phase out of common trust fund ( ctf ) for a better product called unit investment trust fund ( uitf ). uitfs enhance the credibility of pooled funds to investors as the value of investments is mark - tomarket, paving the way for long - term investment opportunities. credit rating agencies we are encouraging the entry of more rating agencies. rating agencies play an important role in guiding investors towards informed decision - making and in ensuring the proper disclosure of investment information. accordingly, we have issued circulars which set the criteria for accreditation of domestic and international credit rating agencies. to date, the bsp has authorized one domestic credit rating agency to issue ratings for bank supervisory purposes. likewise, we have recognized one internationally accepted credit rating agency with a representative office in the philippines to undertake local or national credit ratings. legal and regulatory framework we are also advocating the passage of key legislative measures that will spur the development of the capital market and strengthen the regulatory framework. a key priority is the approval of the extension of the special purpose vehicle ( spv ) law for another two years to complete the cleanup of non - performing assets ( npas ) in the banking system and restore credit supply to the economy. following a succession of asset dispositions under spv i, bnks ’ npl / npa ratios declined to singledigit levels. as of end - december 2005, npl / npa ratio of the commercial banking system stood at 8. 5 percent and 8. 6 percent, respectively. 1 we will also continue to lobby for the enactment of the credit information system act that will establish a central credit information system for improved discipline in the credit process. credit bureaus will be able to serve as a reliable source of information to allow lenders to accurately evaluate risks and select between creditworthy and poor - quality borrowers. another vital legislation is the revised investment company act ( rica ) that will establish a comprehensive regulatory framework to enable investment companies to play a key role in capital formation. moreover, this bill is aimed at protecting the interests of the investing public by preventing the misuse of customer funds. other legislative measures that we would like to see enacted in the near term are the personal equity retirement account ( pera ), the pre - need code and the corporate recovery act. with these reforms in various stages of implementation and others more that are in the pipeline, we

npr. in most areas of risk management, it is our intention to have institutions retain their ability to choose which specific methods they employ. in other words, the guidance identifies an acceptable range of practice for banks. within this range, a bank could use several types of approaches and methodologies. the proposed guidance offers some concrete examples of different approaches that might be considered acceptable practices. in addition to supervisory guidance on requirements for institutions using regulatory risk - based capital requirements ( pillar 1 ), the agencies issued proposed guidance relating to supervisory review of capital adequacy ( pillar 2 ). although this is the first guidance on pillar 2 issued by the u. s. agencies, the supervisory review process described in the guidance is a continuation of the agencies'long - standing approach to bank supervision. however, some aspects of existing supervisory practices are being augmented or more clearly defined to support the proposed basel ii framework. probably the most noteworthy change is a specific requirement, outlined in the npr, for banks to develop an internal capital adequacy assessment process ( icaap ). the proposed guidance offers additional detail about the icaap, but in short, the icaap should identify and measure material risks, set capital goals that relate to risks, and provide governance and controls to ensure that internal capital assessments are subject to proper oversight. the icaap requirement is intended to underscore the agencies'existing view that the primary responsibility for assessing capital adequacy lies with banks. supervisors are responsible for evaluating bank assessments of capital adequacy and for ensuring that the processes for developing those assessments are robust and satisfactory. notably, the proposed icaap requirement is consistent with existing federal reserve supervisory guidance as reflected in supervision and regulation letter 99 - 18. the agencies believe that the proposed supervisory guidance documents are a necessary supplement to the basel ii npr. the guidance includes standards to promote safety and soundness and to encourage the comparability of regulatory capital measures across banks. during the qualification process, a bank's primary federal supervisor will review the bank's risk - measurement and – management framework relative to the qualification requirements in order to determine whether the bank may apply the advanced approaches to calculate minimum regulatory capital. the proposed supervisory guidance documents are companion guidance to the basel ii npr ; therefore, they do not address any public comments received since the npr was issued. the guidance provides additional information that should help banks satisfy the npr's qualification requirements. importantly, the publication of these guidance documents for comment