MB eases rule on winding down period for downgraded banks

Monetary authorities are planning to relax the rules on the winding down period for non-allied undertakings of banks that have downgraded their license from that of a universal bank to a commercial bank.

Sources from the Bangko Sentral ng Pilipinas (BSP) said a one-year grace period may be granted by the Monetary Board upon request by banks that are under rehabilitation.

Penalties and accrued interest for failure to wind down non-allied undertakings particularly in the real estate business will not be waived, however.

A case in point is the Philippine Bank of Communications (PBCom) which, according to industry sources, has incurred about P90 million in penalties and surcharges for its failure to wind down its real estate exposure.

Sources said the 12-month reprieve will be considered provided the bank submits a formal request.

Sources said the reprieve will be granted to the bank as long as there is capital infusion from stockholders to beef up its operation.

PBCom is expected to receive additional capital from its shareholders and about P7.6 billion in government support to bring it back on its feet.

Based on its rehabilitation program PBCom expects its net income to grow from P80 million in 2003 to P200 million next year, P800 million in 2005, and P1 billion in 2006. PBCom posted a net income of P246 million in 2002.

The Philippine Deposit Insurance Co. (PDIC) extended a financial assistance of P7.6 billion to PBCom as a so-called backstop to the bank’s unloading of its bad assets into a special purpose vehicle (SPV).

PDIC’s assistance will be good for 10 years. It will be used to buy government securities that will be pledged as security or collateral for the loan.

The rehabilitation plan of PBCom calls for the disposal of more than P10-billion worth of bad assets through wholesale transfer to the SPV.