BSP evaluates proposed PNB rehabilitation plan

The Bangko Sentral ng Pilipinas (BSP) has begun evaluating the proposed rehabilitation plan of the Philippine National Bank (PNB) intended to bring the bank back on its feet within three to five years.

BSP Governor Rafael Buenaventura told reporters that the BSP has received the proposed plan also addressed to the Philippine Deposit Insurance Corp. (PDIC) that now holds BSP’s interests in the beleaguered bank.

PNB owes the BSP over P15 billion when it was bailed out from a band run last year. It also borrowed another P10 billion from the PDIC. Since then, BSP’s interests have been consolidated into a single P25 billion block under the PDIC which sits as a member of the board of directors.

According to Buenaventura, the BSP’s approval is still needed before the rehabilitation plan can be implemented and it was now being evaluated by the central bank.

"We want to make sure that the plan is viable and realistic," Buenaventura said. "The objective is to bring it back to health within five years."

PNB last reduced its par value last year from P100 to P60 when it sold new shares worth P10 billion as part of the plan to strengthen the bank.

But loss of investors’ confidence over whether the P10 billion would be infused caused heavy withdrawals that forced PNB to avail itself of the emergency loan facility from the BSP and PDIC.

PDIC president Norberto C. Nazareno earlier testified before the Senate, defending the proposed rehabilitation plan of the bank. Considering the current quotations of PNB shares in the stock exchange of P75 per share, he said the proposed acquisition by the government of additional shares at P40 per share indicate the improved position of the government.

Nazareno said that even before taipan Lucio Tan’s takeover, the bank was already experiencing liquidity problems and its capital was already below prescribed levels, thus requiring the infusion of additional capital in the bank which the government was unable to put up.

These liquidity and solvency problems were attributed partly to the financial crisis in 1997 causing major borrowers to default and management deficiencies when the bank was under government management. In previous statements by PNB, government had already sold the bulk of its shares in PNB but the agreement with Tan effectively reversed the privatization process. PNB said, however, that the reverse privatization is intended to be temporary.