CA rules closure of Banco Filipino ‘illegal’

Banco Filipino. AFP FILE PHOTO

MANILA, Philippines—The Court of Appeals ordered the Bangko Sentral ng Pilipinas (BSP) to reopen Banco Filipino and provide a P25-billion financial aid contained in the business plan previously approved by the BSP and the Monetary Board.

The appeals court in a 50-page decision gave the BSP 30 days to extend financial support to Banco Filipino based on the indicated business plan approved by the BSP and MB as it described the closure as “illegal.”

“The BSP and the Monetary Board are hereby ordered to reopen Banco Filipino Savings and Mortgage Bank and allow it to resume business in the Philippines under the comptrollership of the BSP and the MB, complete with a viable rehabilitation plan, in order to ensure fast and immediate recovery of the bank from the ill-defects of the illegal closure,” the appellate court said in ruling penned by Associate Justice Agnes Reyes-Carpio.

The BSP placed Banco Filipino under receivership on March 17 last year, three days after the thrift bank declared a bank holiday.

The BSP said the bank had to be closed because it was insolvent. The liabilities of Banco Filipino had exceeded its assets by P8.4 billion, the central bank said.

Banco Filipino in a petition before the Makati Regional Trial Court asked for a P25 billion worth of financial aid, saying it was entitled to the monetary assistance based on the 1991 Supreme Court decision which ordered the reopening and reorganization of Banco Filipino after its closure in 1985.

The Makati court, in its November 18, 2010 order, granted Banco Filipino’s application for a writ of preliminary mandatory and preventive injunction and directed BSP and MB to immediately implement the bank’s business plan.

But the Court of Appeals last year ruled that the injunction was issued with grave abuse of discretion and overturned the decision of the lower court.

This was reversed however with the appellate court telling the BSP to consider the current landscape since the business plan was drafted in 2009 for necessary “augmentations and adjustments.”

The appeals court also ordered that a special liquidity facility fund be put in place.

It said that while a P25-billion aid was approved by the BSP and MB, supervening events must be taken into consideration.

It cited as an example that when the Banco Filipino was about to close, it had around P16-billion deposit accounts which were reduced as the Philippine Deposit Insurance Corporation started  paying depositors and creditors.

“As soon as the reopening is published and announced, the depositors would flock and congregate in order to make the withdrawals. Thus, there is a need to address this matter before the reopening,” the appeals court said.

Aside from Carpio, the decision is concurred in by Associate Justice Vicente Veloso and Normandie Pizarro.