Banco Filipino bid to reopen denied

Banco Filipino. AFP FILE PHOTO

MANILA, Philippines –(UPDATE) The Court of Appeals has denied the petition of Banco Filipino Savings & Mortgage Bank (BF) to be reopened after being ordered closed by the Bangko Sentral ng Pilipinas earlier this year.

The appellate court denied the petition filed by BF’s stockholders to stop the implementation of the Central Bank’s order to place it under receivership.
The appellate court said in a resolution report obtained by the media on Tuesday , that it found no merit to the request of the closed thrift bank.

“After having considered and deliberated on the petition and the comments of the respondents, as well as the respective discussions and argumentations stated therein, we do not find sufficient cause to grant it,” the CA said in the resolution penned by Associate Justice Agnes Reyes-Carpio.

BSP merely protecting the public
The CA said the Bangko Sentral ng Pilipinas was right to have placed BF under receivership, noting that it is the role of the regulator to protect the public against problem banks. It added that the regulatory action against a bank suffering from financial woes is necessary to maintain public confidence on the banking system.

“Unless adequate and determined efforts are taken by the government against distressed and mismanaged banks, public faith in the banking system is certain to deteriorate to the prejudice of the national economy itself, not to mention the losses suffered by the bank depositors, creditors, and stockholders, who all deserve the protection of the government,” the CA said.

“The mandate of respondents is to regulate and supervise banks to ensure that the later have sound lending practices and practice good corporate governance. Being a government entity, respondent’s acts are prima faciely presumed to be regular. This being the case, we do not see any reason at this time to prevent respondents from doing their task,” the appeals court added.

Business plan for biggest savings bank
The Makati RTC in a 2009 decision had ordered the BSP and the MB to immediately implement BF’s approved Business Plan by releasing, without delay, the P25-billion financial assistance and a package of regulatory relief. The decision was affirmed by the Court of Appeals last year.

The Business Plan for the once biggest savings bank in the country with almost four million depositors before its closure in 1985 during the time of the late Central Bank Gov. Jose “Jobo” Fernandez, was approved by the MB through Resolution No. 1668 and subsequent amendments after seven years of continued summary denial.

The bank was ordered padlocked and liquidated in 1985 by the defunct Central Bank (CB) then headed by the Fernandez Jr. as its governor and chairman of the Monetary Board (MB).

In 1991, the Supreme Court declared the closure “arbitrary and with grave abuse of discretion.” The decision became final in 1992.

On July 27, 1984 when BF was placed under conservatorship through MB Resolution No. 955, the bank filed its first civil case denominated as CV No. 8108.

On Jan. 25, 1985, the then CB issued MB Resolution No. 75 that ordered the closure of BF and placed it under receivership. The second civil case denominated as CV No. 9675 was filed by BF.

On March 22, 1985, BF was placed under liquidation prompting the padlocked bank to file its third civil case denominated as CV No. 10183.

“Ponzi” scheme
Last March, the Monetary Board of the Bangko Sentral ng Pilipinas placed BF under the receivership of the state-owned Philippine Deposit Insurance Corp. (PDIC). The move, the BSP said, came amid the continuing poor financial condition of BF.

The BSP said the thrift bank had become insolvent, noting that its liabilities exceed its assets by P8.4 billion. The BSP also said BF had been losing an average of P2 billion a year since 2007.

The BSP likewise accused BF of engaging in unsound banking practices, particularly the use of the deposits it gathered from the public to extend loans to the bank’s owners and officers.

The BSP likened practices of BF to a “ponzi scheme,” saying the interest it had been using to pay depositors were coming primarily from new deposits rather than income from investments.

Government data showed that BF had 177,652 depositors with total deposits of P15 billion. Following its closure, BF immediately filed before the CA a petition to be reopened. BF officials said the BSP exercised arbitrariness in closing the thrift bank, denying claims that it is insolvent. BF explained it was simply a victim of a smear campaign, which the thrift bank said was the reason for heavy withdrawals that it experienced days before its closure.

BF charged BSP officials were behind the smear campaign. BF revealed that it was asking for an emergency loan from the BSP when it experienced heavy withdrawals, which eventually forced it to declare a bank holiday. Meanwhile, its loan application was denied by the regulator.

BF said it was the responsibility of the BSP to lend it money to help prevent a bank failure, but the BSP countered that it did not deem it wise to lend to BF.

Lawyer Perfecto Yasay, BF Vice Chairman and former chair of the Securities and Exchange Commission questioned the legality of the BSP order. He pointed out that there is already a preliminary mandatory preventive injunction already issued by the Makati City Regional Trial Court Branch 66 ordering the BSP to implement the (BSP and Monetary Board approved) business plan.

The petition was prompted by the BSP order putting the bank under Philippine Deposit Insurance Corporation (PDIC) receivership and ordered that assistance be immediately given to its 177,652 depositors.

The BSP explained that the bank has insufficient realizable assets to meet its obligations with its net realizable value at –P8.4 billion.

But Yasay maintained that the BF is not insolvent and has assets worth P25-billion.

But the appellate court replied that for BF to secure a temporary restraining order, “there must be a patent showing by the applicant that there exists a right to be protected and that the acts against which the writ is to be directed are violative of said right.”

The appeals court said there has to be proof of a violation of their right, otherwise the BSP’s move to place BF under receivership will enjoy the presumption of regularity.

PDIC begins paying small depositors
Meanwhile, the PDIC announced the other day that it has already begun paying the deposit claims of small depositors of BF. PDIC also said it will start paying deposit insurance claims of depositors with accounts of more than P10,000 starting June.

Under the law, a deposit worth P500,000 or less is covered by deposit insurance provided by PDIC.