and 0. 03 percent, respectively. as an industry, thrift banks continued to be the least profitable. bsp reform agenda the bsp is determined to pursue a banking reform agenda to shield the banking system against critical threats that may undermine its stability and integrity. specifically, we are intensifying the reform process aimed at addressing core aspects of banking operations and enhancing the regulatory framework for the effective conduct of banking supervision. first of all, we must bear in mind that high npas are a fundamental threat to the safety and soundness of the banking system. we must therefore act decisively to remove this threat. so far, we have been successful in trimming down the stock of npas in the banking system especially through asset disposition under the special purpose vehicle law ( spv ) law. consequently, both npl and npa ratios of the banking system are currently at record lows. the imminent approval of a two - year extension of the spv law by congress will boost the momentum for further disposal of banks ’ npas. i hope the industry will now more aggressively utilize this opportunity. this is the last chance. in a related development, the monetary board ( mb ) also recently approved the guidelines that would allow banks to enter into joint venture agreements ( jva ) with property developers to provide an additional channel for banks to reduce their npa holdings by helping convert bad assets into readily marketable or income producing assets. however, to prevent abuses, certain safeguards were adopted. in the first place, all jvas under the program are subject to prior mb approval. only pre - existing non - performing assets are eligible under the program to guard against potential moral hazard. banks are also prohibited from providing funds to the joint venture either as a loan or capital contribution. however, banks may extend financing to jv partners or to buyers on arms length commercial basis. lastly, banks are not allowed to recognize income out of the properties they contributed to the joint venture regardless of the agreed valuation of said properties in the jva. they are only allowed to recognize income upon receipt of the proceeds from the sale of the developed properties. proper accounting is also required. moving on, we also continue to seek closer alignment of existing regulations with international standards to make regulatory policies more responsive to the growing competitiveness and sophistication of the financial services industry. in particular, we are focusing on strengthening corporate governance, risk management, and capital adequacy in our banks. this will be complemented with

has been the subject of criticisms from the regulatory community. the bsp has taken bold steps on these issues. at the onset, we emphasized that all financial institutions under bsp supervision should comply with the provisions of the new standards in all respects in preparing their audited financial statements. however, we remained steadfast in our position that financial institutions should provide for both incurred and expected losses. in this regard, they have to comply and reflect the bsp recommended valuation reserves in the prudential reports or in the reports submitted to bsp. on the other hand, considering the amendments of the iasb on the fair value option provisions, we allowed financial institutions to use the said classification, subject to certain regulatory conditions such as : • having an appropriate risk management system prior to initial application of the fair value option for a particular activity or purpose and on an ongoing basis. • the fair value option may only be used for instruments for which fair values can be reliably estimated ; and • financial institutions should provide bsp with supplemental information as may be necessary, to enable bsp to assess the impact of the financial institution ’ s utilization of the fair value option. the adoption of the standards does not only call for alignment of existing regulations with the provisions but also necessitates the establishment of the infrastructure for prudential financial reporting. in this respect, we have revised the manual of accounts and developed a new reportorial requirement for banks. the advantage of going through this exercise is that we, as regulators, were given an opportunity to design the reportorial structure to create a common platform serving all our information requirements. the amount of information that we will be able to generate from the new reporting structure will enhance our off - site supervision capabilities. the philippine transition to ifrs is a consultative process involving the regulators, industry players and external auditors. the different perspectives shared in this endeavor helped us in understanding the principles behind the standards and the impact of adoption on our interrelated functions. disclosures and good governance one of the key features of the standards is the overwhelming amount of disclosure requirements. this has made financial reporting a complex process. however, looking at the upside of it, these disclosure requirements will empower the stakeholders in making relevant decisions. the bsp believes that this uncovering of more information, will help us realize our vision of full transparency, which is one of the pillars of good corporate governance. disclosures along with the other reforms that we have implemented such as requiring the