Urban Bank top brass responsible for its closure, says Ombudsman

The Office of the Ombudsman has placed the blame for the closure of Urban Bank Inc. squarely on its former president, Teodoro Borlongan Jr., and chairman Arsenio Bartolome III.

"It bears stress that what precipitated the closure (of Urban Bank) was the declaration of a bank holiday by the bank’s pricipal officials (Borlongan and Bartolome) concurred in by the directors," Ombudsman Aniano Desierto said in a decision on a complaint lodged against the Bangko Sentral ng Pilipinas by former Quezon City Rep. Michael Defensor.

Defensor had accused former Finance Secretary Jose Pardo and other members of the Monetary Board, Bangko Sentral ng Pilipinas Governor Buenaventura, BSP Deputy Governor Alberto Reyes, and 12 other central bank officials of closing Urban Bank and its thrift and investment units illegally, with undue haste and under "suspicious" circumstances.

Desierto concluded that there was no reason to proceed with a criminal case against Pardo, Buenaventura, Reyes and the others accused because Defensor, apart from "lacking legal personality," also lodged a complaint that was "premature" and "unadequate."

In a 12-page ruling penned by graft investigation officer Rogelio Ringpis, the Office of the Ombudsman upheld the central bank’s findings that Urban Bank, when it was shut down on April 26 last year, was already bleeding to death because of Borlongan’s and Bartolome’s efforts to bail out Urbancorp Investments Inc.

The Ombudsman upheld reports prepared by the BSP’s Supervising and Examination Sector (SES) that Urban Bank suffered cash problems when Borlongan authorized the purchase of over P4.6-billion worth of "garbage" loans to save Urbancorp Investments.

The SES reports also provided details about liquidity problems that hit Urban Bank when its foray into real estate suffered huge setbacks.

"We are more inclined to give more credit to the position of the defense for it was shown that indeed the questioned reports are truly reflective of the precarious situation then of the three closed firms, which even the closed firms’ principal officials and directors recognized when they themselves opted to declare a bank holiday."

The ruling also recognized that "receivership was more appropriate for the closed firms instead of conservatorship given the admission of Bartolome and Borlongan of their bank’s inability to meet the continuing deluge of withdrawals". Receivership effectively preserved the assets and prevented tampering of the records.

Urban Bank, meanwhile, is now back in business as a partner of the Export and Industry Bank. It reopened in September and its rehabilitation plan provides that the depositors and creditors will be able to get their money back within a three-year period.