We’ve lost our sense of shame

The New York Times just described our banking system as “murky”. It makes you think of some Caribbean country whose economy gives it no choice but to welcome shady financial characters. Have we stooped that low? Money laundering for criminals, after all, is as threatening to world order as providing safe shelter for terrorists.

Here is that NYT quote: “the caper is highlighting what looks like a weak point in the global financial system that allowed the money to get by regulators: the murky banking system of the Philippines.” We are the weak point of the global banking system? That should hurt.

Our Central Bank Governor is cited as one of the best in the World for many years now. That honor is thrown away by one commercial bank that was less than true to its responsibility as a bank and as a Philippine institution. RCBC is or was a reputable bank with no less than the IFC, an affiliate of the World Bank, among its shareholders. But I don’t think I can ever look at RCBC the same way again.

The worst part of the deal is that the bank and its CEO refuse to take responsibility. Even assuming that everything the bank lawyer told the Senate committee is true, the other plain and simple truth is that their control systems failed rather badly.

Lorenzo Tan, RCBC president and CEO, was until recently President of the Bankers Association of the Philippines. I want to believe he had nothing to do with the caper of the branch manager, as he claims. But that doesn’t absolve him of command responsibility. At the very least, he should have apologized quickly.

There is nothing wrong with an apology. It is not an admission of guilt. As former banker Leo Alejandrino observed in his blog, an apology “connotes humility for the frailty of the human condition. Neither RCBC nor any of its management has to my knowledge apologized for the harm it may have caused this country’s international standing and the bank’s constituents- its shareholders, its staff, its depositors, its public. There is still time to do this but not much because a late apology is almost worse than none at all.”

Mr. Tan cannot escape the fact the caper happened in his watch. He is responsible for the total operations of the bank and its control mechanisms. Complacency or plain bad luck it may all be but he is responsible for making sure RCBC’s system is working to prevent capers such as this.

As a former banker himself, Mr. Alejandrino suggested that Mr. Tan “may want to offer to fall on his sword not as an admission of guilt or an act of contrition but as an expression of honor, of putting his institution ahead of himself.”

If this happened in Japan, he would have immediately resigned out of a sense of honor and responsibility. The necessary bloodletting mitigates the damage on the institution and on the country.

Indeed, RCBC’s Board of Directors shouldn’t have quickly reassured Mr. Tan he still had their trust and confidence when Mr. Tan asked to go on leave. They should have asked him to resign. Bank Presidents and CEOs get outrageous salaries and benefits packages because they have to put their job on the line and take big risks on their own reputation every minute of the day.

Pinning the blame on the branch manager is just a legal maneuver to escape possible criminal prosecution. But it is difficult to believe a lowly branch manager can move that much money without alarm bells sounding and higher officials noticing and asking very basic questions.

In the He said/She said exchanges, the one that suffers most is the bank’s credibility. It doesn’t matter whoever is telling the truth because both are after all, working for the same bank and one of them must be a liar.

I have worked in two banks myself in the course of my career. I know branch managers have limited authority even if they have outsized responsibilities for bringing in business and relating to customers.

The branch at the center of the caper is supposed to be one of RCBC’s top branches so the branch manager may have wider latitude to move. But the amounts involved should be well above her approving authority, indeed may be above the authority of even a bank vice president. If Mr. Tan was unaware that about P4 billion was moving in and out of his bank quickly, there is something wrong with his management system.

In any case, RCBC’s integrity has been compromised. They can dismiss the branch manager but it doesn’t change the fact she was acting on behalf of the bank at the time the caper was going on.

Forged signature cards, fictitious persons opening accounts, transferring funds to an account whose owner claims was opened without his permission, ignoring a stop payment order and getting away with it… How can all these happen in a bank previously as respected as RCBC? These are all violations of basic banking rules. This sloppiness affects the trust customers have with their bank.

None of these violations happened overnight. The accounts were dormant for a year before the big remittances were deposited and withdrawn. The bank’s auditors and senior management should have caught something amiss. This failure is what the bank president and CEO must take responsibility for… must apologize for and even resign for.

Do-gooders in the private sector often denounce government officials for lack of delicadeza or a sense of shame when something less embarrassing to the nation happens.

But we now have a private banking official in a similar or even worse situation and all we can hear from him is how innocent he is. He probably is but where is his sense of shame? Where is his sense of responsibility for something really bad happening in his watch? Maybe he should run for public office.

RCBC has tarnished the country’s image in a way that makes us bow in shame because we were all tarnished as a people. Our reputation as a fast rising star and an ideal investment destination may have been damaged as well.

BSP Gov. Say Tetangco worries that the caper puts the Philippine financial system at risk. He didn’t specifically say it, but we could end up in the gray or black list again of non compliant countries to anti money laundering practices. That would make it difficult and expensive for our OFWs to send money back home.

I found this comment of Wilfredo G. Villanueva (he might be the same Willy Villanueva I worked with early in my career but lost track of) in a blog by “chempo” in Joe America’s blogsite on the subject that sums up my feeling as well:

“The world is watching. Not a boxer’s victory, not a beauty title or titles, not good singers, not a well-educated and English-speaking work force here and abroad, no not those. Not even a million Pacquiao victories can erase what money launderers and RCBC did to Bangladesh.

“The country is almost a twin of the Philippines—an emerging economy subject to vagaries of weather, recovered from a severe drought in the seventies, poor but struggling to break free from poverty just like us.

“USD81 million lost by hacking. That’s widow’s mite. The world is watching. Not too much talk, please, Senators of the realm. Let’s not play politics again, until the issue dies down and Bangladesh is left with an empty bag, issue unresolved as usual, lost in rhetoric and political grandstanding and one-upmanship. Do everything you can to give justice to the poor country.”

I still want to believe that we have not lost our sense of honor as a people. I hope the resolution of this case will prove that to the world.

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco.