Palace happy with BSP's swift action in closing BF

Malacañang said on Sunday it was satisfied by the "swift action" the Bangko Sentral ng Pilipinas (BSP) took when it closed Banco Filipino, and was satisfied by the follow-through staged by the Philippine Deposit Insurance Corp. (PDIC) to allay fears of depositors. The BSP had closed down Banco Filipino on March 17 and placed it under the receivership of PDIC since it was no longer able to pay its liabilities in the ordinary course of business. “Nakita naman natin (We all saw) that the BSP took swift action here, the PDIC has been through the media talking to the depositors and telling them they will be given back their money," said Presidential Communications Development and Strategic Planning Office secretary Ramon Carandang on government-run dzRB radio. “Minamadali ng PDIC ang pagsauli ng pera ng mga depositor ng Banco Filipino (The PDIC is fast tracking the process of giving back to depositors their money)," Carandang said. The PDIC had earlier said it aims to give back the money of those with deposits of P5,000 below via mail, while those with deposits above P5,000, non-updated records, or outstanding loans will have to fill up applications to get their money back. Palace had no part in bank’s closure Carandang pointed out that BSP Governor Amado Tetangco Jr. had gone to Malacañang shortly after announcing Banco Filipino’s closure to merely brief President Benigno Aquino III on the matter. Carandang said: “After the Monetary Board meeting, when they decided to take action against Banco Filpino, si Gov. Tetangco ay nagpunta sa Malacañang para ipaalam kay Pangulong Aquino as a courtesy, ito ang findings naming, ito ang magiging decision namin. [Gov. Tetangco went to Malacañang as a courtesy just to brief Aquino on the BSP’s findings and decison.]" “Let me reiterate," he said. “Walang papel ang Malacañang dito. [The Palace had no role in this.] It’s a banking regulatory problem handled by the BSP. The BSP had ample power to deal with it." Mismanagement, excess, overdue loans The BSP said on Sunday that years of mismanagement and excesses brought down Banco Filipino for a second time and forced authorities to place it under receivership yet again. “The officers of Banco Filipino Savings and Mortgage Bank (BF) mismanaged money entrusted to them by their depositors by its continued lavish spending and allowing loans to remain unpaid, including billions in overdue loans granted to its stockholders, officers, and related companies," the BSP said in a statement emailed to journalists. As of Sept. 20, 2010, according to the BSP, 91 percent of all loans taken out by the beleaguered bank were already overdue. “In particular, uncollected overdue loans to BF directors, officers, stockholders and their related interests (DOSRI) reached P2.2 billion or more than half of BF’s total loan portfolio," the BSP said. It noted while the bank’s annual gross income over a three-year period ending 2009 averaged only P242.5 million, Banco Filipino allegedly racked up expenses for salaries, benefits and professional fees averaging P597 million or 2.5 times more than what the bank was earning. “In 2010, legal fees alone reached P245 million, of which P131 million was spent in the last quarter," the BSP said. This developed even though Banco Filipino still owes the BSP P4.4 billion in loans outstanding as of September 2010, the BSP said. “Banco Filipino lured depositors with interest rates way above prevailing market rates. For instance, while most banks pay interest of 1 percent to 2 percent for special savings deposits, BF paid so much more – from 6 percent to 13.9 percent for special savings deposits. As a result, BF’s interest expense was higher than its interest income. Between 2007 to 2009, its average negative net interest margin was P1 billion a year," the BSP said. The BSP also said that a huge chunk of BF’s assets were in fact “losses that have been capitalized." The BSP pointed out: “In the days before it was placed under PDIC receivership, BF was no longer able to settle its obligations as they fell due. For instance, due to insufficient balance in its demand deposit account with the BSP, the Philippine Clearing House Corporation returned about P789 million worth of BF checks as of March 15, 2011." “Also on March 15, the BSP started receiving complaints from BF depositors in different parts of the country that they were no longer able to withdraw their deposits from BF," the BSP added. Troubles with CB-BOL The BSP said that in performing its regulatory role over banks, “it always strives to strike a balance between full adherence to due process and the faithful enforcement of banking laws and prudential regulations that protect our banking system." Banco Filipino was ordered closed by the then Central Bank of the Philippines in 1985 on grounds of alleged insolvency but was subsequently allowed to reopen in 1994 when the Supreme Court ruled its closure illegal. Banco Filipino has a standing P18.8-billion damage suit against the Central Bank-Board of Liquidators or CB-BOL. There is dispute as to whether the BSP could be held liable for the acts of the defunct Central Bank as the latter’s successor in interest. The BSP has steadfastly held they are not a successor in interest to the old central bank. — MRT/VS, GMA News