Philippine Bank Banco Filipino Closed

By Joann S. Villanueva

Past due loans, particularly of Banco Filipino Savings and Mortgage Bank (BF) officers and stockholders, and expenses higher than what it could really pay were the reasons why the bank became insolvent and had to be closed down.

The Bangko Sentral ng Pilipinas (BSP), in a statement on Sunday, said that as of last September, 91 percent of the loans granted by the thrift bank were overdue.

Specifically, loans extended to BF directors, officers, stockholders and their related interests (DOSRI) amounted to P2.2 billion or more than half of the bank’s total loan portfolio, it said.

Also, the bank’s annual gross income from 2007 to 2009 averaged to P242.5 million, a far cry from the average of P497 million it spent annually for the salaries and benefits of its employees as well as on professional fees.

“In 2010, legal fees alone reached P245 million, of which P131 million was spent in the last quarter,” the central bank said.

The BSP said the thrift bank owes it P4.4 billion in past due loans as of last September.

Earlier, BSP Deputy Governor Nestor Espenilla Jr. said BF has a net realizable net value of P8.4 billion, which means that its assets cannot cover its liabilities, thus it is even in deficit.

The central bank said BF was on a losing streak since 2002 with the biggest recorded in 2007-09 at more than P2 billion a year on the average.

To address its liquidity problem, the central bank said BF enticed depositors with a six to 13.9 percent interest rates on special savings deposits, which is above the prevailing one to two percent offered by the industry, thus, it accumulated more liabilities as interest expenses surpass interest income.

BF’s total deposit as of last September stood at P16.5 billion and this slightly rose to nearly P17 billion last December but declined to around P15 billion as of March this year.

“Between 2007-2009, its average negative net interest margin was P1 billion a year,” BSP said.

In addition to mounting liabilities, the central bank said the thrift bank’s assets are “in fact losses that have been capitalized.”

The BSP disclosed that before central bank’s seven-member policy-making Monetary Board (MB) placed BF under Philippine Deposit Insurance Corporation (PDIC) receivership last March 17, the thrift bank “was no longer able to settle its obligations as they fall due.”

For one, BF’s checks as of last March 15 worth P789 million issued to the Philippine Clearing House Corporation bounced because of insufficient balance in the bank’s demand deposit account with the BSP.

The central bank said it also received reports starting last March 15 from BF depositors nationwide of their incapacity to withdraw their deposits in the bank, thus it has to place the erring bank under PDIC receivership, stressing that this decision was made after extending due process to the erring bank.

“The BSP emphasized that in performing its regulatory role over banks, it always strives to strike a balance between full adherence to due process and the faithful enforcement of banking laws and prudential regulations that protect our banking system,” it added.

Espenilla earlier said the 177,652 depositors of BF need not worry over their money in BF as PDIC will ensure that all remaining assets of the thrift bank will be liquidated to pay its creditors, employees and depositors.

He said 97 percent of the bank’s depositors are fully covered by the maximum deposit insurance of P500,000. Depositors who have P5,000 or below worth of deposits and without loans from the bank need not file deposit insurance claims to the PDIC because they will be immediately paid, through postal money order (PMO), within a week.

The PDIC conducted Depositors’ Forum last week to distribute claims forms to BF depositors with accounts amounting to over P5,000 and to tell these affected clients how they can get back their money. (PNA)

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