BSP sanctions bank for P1.75-B fraud

Dozens of officials of Metropolitan Bank and Trust Co. will be suspended on orders of the Bangko Sentral ng Pilipinas, which unveiled yesterday sanctions against the country’s second-largest lender after a P1.75-billion internal fraud case was uncovered last July.

The suspensions of the bank officials—who range from mid- to top-level executives of the Ty family-controlled financial giant —will range in duration from one to three months, according to banking industry sources.

Both the BSP and Metrobank have declined to disclose the identities and the exact number of officials who would be sanctioned as well as bank directors who would receive reprimands from regulators.

The internal fraud case allegedly involved a ranking bank official who systematically siphoned off loans to corporate clients by surreptitiously diverting the funds into bank accounts under her control. The official, Ma. Victoria Lopez, was arrested and is detained at the Makati City jail while the case is being heard in court.

In its statement, the BSP said the reprimands and suspensions would be imposed on directors and officials “who failed to perform adequate oversight and/or have been complacent or remiss of their duties and responsibilities.”

The Monetary Board also ordered the publicly listed bank controlled by the Ty family to allocate P4.45 billion of its capital on a consolidated basis to cover for higher operational risk.

“The requirement is subject to periodic review and would be lifted when the bank is determined to have put in place adequate risk control measures to address the weaknesses noted,” BSP said.

The bank was also ordered to execute and submit a letter of commitment, to be implemented and completed within a year, to enhance corporate governance, credit administration, internal controls and audit, risk management, and customer on-boarding and monitoring processes.

“In determining the appropriateness of the sanctions, the Monetary Board took into consideration Metrobank’s strong financial condition and immediate corrective actions to contain further financial damage,” the central bank said.

“Together with medium- to long-term initiatives that will serve to improve governance, controls and compliance, the Monetary Board reaffirms the safety and soundness of Metrobank,” it added.

In a separate statement, Metrobank said it had agreed to set aside P4.45 billion in capital buffer as required by regulators to cover for higher operational risks. The top officers also accepted accountability and assumed command responsibility for the issue.

Metrobank said it appreciated the BSP’s “affirmation” of the bank’s strong financial condition, safety and soundness, while assuring the public that the bank’s operations remained “business as usual.”

With P2 trillion in assets and P210 billion in equity, Metrobank assured the public that it was in a strong position to set aside P4.45 billion of capital reserve in line with the BSP’s directive.

“In addition, the bank has proactively absorbed the entire amount related to this incident in the third quarter. Despite this, the growth momentum of the bank remains robust and results for the year are ahead of plan,” the disclosure to the Philippine Stock Exchange (PSE) said.

Metrobank reiterated that after conducting a 100-percent audit, no customer was affected.

“This is an isolated incident. The perpetrator acted alone and for her sole benefit. She has been apprehended and cases against her have been filed,” Metrobank said.

Metrobank said that it was proactively reviewing and improving its systems, noting this was “exactly how the fraud was detected.”