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Item Restricted Nonperforming loans as a factor affecting the health of banking system(2007-04) Corpuz, Jose Rowell T.; Guzman, Lauren Jerei T.; Alburo, Florian A.This paper focuses on addressing the significance of nonperforming loans on the Philippine banking system as these particularly affect the bank sector profitability. It discusses factors affecting the nonperforming loans and aims to test whether or not SPV Law help solve the bad loans problem. The paper uses Granger-causality techniques to test whether or not the hypotheses on loan loss provision, operating expenses, capital adequacy ratio and nonperforming loans hold. Moreover, regression model is used to show how margin of intermediation, operating expenses, nonperforming loans, and SPV law affect the health of banking system. The analysis is consistent with the hypotheses regarding nonperforming loans and others and it further reveals that SPV law positively affects bank sector profitability.