Court of Appeals orders Bangko Sentral to reopen Banco Filipino

(Updated 6:36 p.m.) For lack of proof that Banco Filipino Savings and Mortgage Bank engaged in risky banking practices, the Court of Appeals ordered regulator Bangko Sentral ng Pilipinas to reopen the bank.   The decision, penned by Associate Justice Agnes Reyes-Carpio, was promulgated on Jan. 27, but was released to the media only on Tuesday.   The appellate court also directed respondents Bangko Sentral, its policy-setting Monetary Board and the Philippine Deposit Insurance Corp. (PDIC) to give Banco Filipino a financial assistance of at least P25 billion within 30 days.   Respondents BSP, Monetary Board and PDIC gravely abused discretion and violated the bank’s right to due process when they implemented MB Resolution no. 372-A on March 17, 2011, according to the CA.   The MB resolution placed the bank under receivership and barred it from continuing its business operations due to “unsound banking practices,” the court added.   “In this case, we do not see any proof that Banco Filipino committed unsafe banking practice and whether its attention was called to rectify or remedy the same,” the decision noted. “We also do not see from the records if any administrative sanction as prescribed above had been imposed by respondents BSP and MB to any of the bank's officials and employees,” it added. “We also do not see from the records if any administrative sanction as prescribed above had been imposed by respondents BSP and MB to any of the bank's officials and employees,” it added. 'Ensure fast and immediate recovery'   Bangko Sentral on March 17, 2011 closed Banco Filipino and placed it under receivership PDIC, saying its liabilities topped its assets by P8.4 billion.    BSP Deputy Gov. Nestor Espenilla Jr. at that time said the central bank's seven-man Monetary Board decided to place Banco Filipino under the receivership of PDIC since it was no longer paying its liabilities in the ordinary course of business.   "Banco Filipino cannot continue in business without involving probable losses to its depositors and creditors," Espenilla told reporters in a press conference at the central bank.   In its Jan. 27 decision, the appellate court said that the Bangko Sentral and its Monetary Board should allow Banco Filipino “…to resume business under the comptrollership of the BSP and the MB, complete with viable rehabilitation plan, in order to ensure fast and immediate recovery of the bank from the ill-effects of the illegal closure.”   It noted that before the bank was closed, a business plan crafted by the Bangko Sentral, Monetary Board and Banco Filipino — with a provision for a P25-billion emergency loan — was up fro approval.   However, with the expected heavy withdrawals on the first day of the resumption of the BF's business, the appellate court said adjustments in the business plan may be necessary.   It also noted that prior to the bank's closure, it had around P16 billion deposit accounts which were reduced substantially as PDIC started paying depositors and creditors.   Given the media mileage the case has received, Banco Filipino depositors will seize the opportunity to withdraw their money and transfer their deposits to other banks that they perceive to be safer and healthier, the court said.   “Thus, the challenge is for this Court to give a clear and particular direction to the reopening and reorganization of Banco Filipino, with the objective that it be restored in such a state that it can continue with its business with safety and confidence to its creditors, depositors and the general public and at the same time preventing a repetition of this case the third time around,” it added.   The Bangko Sentral and the Monetary Board should extend Banco Filipino the financial support it needs by putting up a special liquidity fund equivalent to the amount of its deposit base or more so it can service expected heavy withdrawals when it reopens, according to the court. Assets exceed liabilities   The court merited the Banco Filipino stockholders, who filed the petition and argued that the bank did not have a negative net asset value, that its total assets exceeded its liabilities by P25 billion.   They noted that the appraised value of Banco Filipino’s real properties was P37.89 billion and its deposit liabilities amounted to P19.40 billion.   With those figures, the CA contended that the bank would not have been declared insolvent and could not have been granted an emergency loan had the Monetary Board exercised caution.   The appraisal report was prepared by Saromo Realty, Appraisal and Consultancy Firm in compliance with the directive of the House of Representatives committee on banks and financial intermediaries which contradicted the Monetary Board’s position that Banco Filipino was insolvent, the CA noted.   It cited that Monetary Board member Nelly Favis-Villafuerte even wrote a memo asking the Monetary Board to reconsider its decision since Banco Filipino was not given advanced notice on the board’s findings. Neither was Banco Filipino given the chance to refute the claims against it.   “Had respondents BSP and MB exercised due diligence, depositors and creditors would have been spared from the agony and the nightmare this case had caused. They would not have experienced sleepless nights and serious anxieties,” the CA said. — VS, GMA News