The bid to find a buyer for Export and Industry Bank was proceeding smoothly, but the bank was forced to close by a single stumbling block that scuttled the entire deal, according to officials of the shuttered financial institution.
Speaking exclusively to the Inquirer last week, Export Bank officials—led by its chairman, Jaime Gonzales, and president, Juan Victor Tanjuatco—said they did everything possible to save the bank, but their efforts were derailed by a single issue that was beyond their ability to resolve.
“We had a deal with Banco de Oro which we’ve been working on for the last three years,” Gonzales said. “BDO was ready except for one condition.”
He said that this condition—the settlement of a pending legal dispute that would have cost the bank as much as P1.5 billion if it lost—was a requirement of regulators such as the Bangko Sentral ng Pilipinas and the would-be white knight.
“We had to settle with finality and to their satisfaction this legal case which was filed versus the bank,” said Gonzales, who declined to identify the complainant or the nature of the complaint.
Sources revealed, however, that the legal issue stemmed from a stock market transaction executed by a prominent Filipino-Chinese businessman in the mid-1990s through the stock brokerage unit of Export Bank named E-Securities.
According to the sources, the businessman failed to pay for the stock purchase order when the payment came due, forcing the stockbroker to sell the shares.
The businessman supposedly did not contest this disposal of shares until much later when the price of the stock he bought started rising, after which he initiated a claim against the stockbroker.
By the sources’ estimates, the businessman’s P1.5-billion claim is worth about 10 times the original purchase in the 1990s.
Meanwhile, Gonzales said Export Bank’s finances were also hobbled by huge nonperforming assets, in the form of foreclosed properties, which were inherited from previous owners, including those from the portfolio of the defunct Urban Bank which Export Bank acquired a decade ago.
Gonzales said these illiquid assets were sold several years ago under the Special Purpose Asset Vehicle scheme, which allowed banks to liquefy their foreclosed assets but at steep discounts which they had to cover with their capital.
It was such a transaction that helped clean up Export Bank’s bad loans, but also resulted in its capital being depleted to the point that it needed a new investor, he said.
“This is why we needed someone like BDO to come in,” Gonzales added.
Despite this explanation, irate depositors of the bank said they were intending to pursue legal action against bank officials for gross negligence and explore the possibility of criminal wrongdoing within the bank.
Lawyer Ferdinand Topacio, who represents a group of large depositors, said the bank officials exhibited a “pattern of deceit” when dealing with their clients, including many branch officials having convinced depositors to keep their funds with the bank in the days leading to its closure.
“We want to know which [higher] officials instructed [branch officials] to convince their clients to keep their money in the bank,” he said, noting that any financial trouble would have been evident internally by this time.
Topacio said they will be looking at bank officials’ potential culpability in violating provisions of the General Banking Law, the Corporation Code and banking regulations against excessive related party lending.