Uninsured depositors appeal against Export Bank liquidation

MANILA, Philippines–A group of uninsured depositors of Export and Industry Bank has petitioned the government to discontinue the liquidation of the bank, citing the need for a reasonable period of time to map out a viable rehabilitation plan for the defunct bank.

At a meeting held on Monday at the Dusit Hotel, uninsured depositors representing a “substantial” portion of the uninsured deposits unanimously approved an appeal to the Bangko Sentral ng Pilipinas and Philippine Deposit Insurance Corp. to reconsider the liquidation process.

“The uninsured depositors of EIB–ho had placed their hard earned funds with the bank believing in the bank’s soundness, stand to lose billions of pesos in deposits if the liquidation proceeds. We appeal to the BSP and PDIC to give the uninsured depositors of EIB consideration and window to propose a viable rehabilitation plan for the bank. By doing so, all EIB depositors will get a fighting chance to redeem what they would lose in a liquidation scenario,” said lawyer Alfonso Reyno Jr., who leads the effort to propose a new rehabilitation plan for EIB.

The uninsured depositors stated that a viable rehabilitation plan was in their best interests. During their meeting, they formed a steering committee comprised of uninsured depositors from Luzon, Visayas and Mindanao.

The group acknowledged that a vital component of EIB’s rehabilitation would require the conversion of their uninsured deposits into equity, the deferral of time deposits or a combination of these at a ratio to be determined with new strategic investors.

But if banking regulators would proceed with their liquidation plan, the group said “billions of pesos that were the life savings of families, farm cooperatives, small businesses and more around the country will be irretrievably lost.”

Under present regulations and law, uninsured depositors may only receive compensation up to P500,000 each.

Based on PDIC numbers, EIB has P11 billion uninsured deposits from 2,666 accounts.

The majority shareholders of EIB have likewise gone to court in an attempt to fend off the bank’s liquidation, alleging “indecent haste” and “grave abuse of discretion amounting to lack or excess of jurisdiction” among banking regulators which ordered such dissolution.

The shareholders alleged that the PDIC had imposed “unreasonable and oppressive” conditions that delayed or frustrated the transaction between EIB and Banco de Oro Unibank, which earlier agreed to be its white knight.  Among those that PDIC had “erroneously” considered as a contingent liability of EIB, the petition said, was the Pacific Redhouse case to which EIB was not a party.

The case referred to a lawsuit against EIB’s stock brokerage unit.  A regional trial court has ordered the EIB unit to pay P1.5 billion in damages to the group. The Supreme Court afterwards resolved the debate on the so-called “piercing of the corporate veil of corporate fiction.”

The investors also alleged that PDIC had “frustrated” the efforts of EIB to increase its liquidity by selling its MRT bonds to a private third party. The PDIC was requested to sell MRT bonds to third party investors to unlock more funds for the bank but the petitioners said the  regulator had denied such request, requiring EIB instead to sell them only to government-owned Development Bank of the Philippines and Landbank of the Philippines but these were not interested.

By the time PDIC approved the sale of the MRT bonds to third party investors, the petition said this was “too late” because the buyers were no longer interested. For instance, it noted that the PDIC had required consent from all creditors and uninsured depositors, even as the PDIC itself acknowledged that 15 percent of depositors could no longer be located because of incomplete and outdated addresses and contact details.