Banco Filipino officers mismanaged P15-billion deposits - BSP

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) said officers of Banco Filipino Savings and Mortgage Bank mismanaged P15 billion worth of deposits resulting anew in the collapse and closure of the erstwhile biggest savings bank in the country.

The BSP said in a statement release over the weekend that officers of Banco Filipino engaged in unsafe and unsound banking practices by offering high interest rates, continued lavish spending, and leaving loans extended to stockholders, officers and related entities unpaid.

The central bank said Banco Filipino lured depositors with interest rates way above prevailing market rates by offering six percent to 13.9 percent for special savings deposits instead of the one percent to two percent offered by other banks.

This resulted in an average negative interest margin of P1 billion a year between 2007 and 2009 and Banco Filipino’s interest expense was higher than its interest income.

Banco Filipino managed to lure 177,652 depositors, more than half or 53 percent of whom have accounts with deposits below P5,000 each.

The BSP added that officers of Banco Filipino mismanaged the money entrusted to them by their depositors through continued lavish spending by paying an average P597 million a year between 2007 and 2009 for salaries, benefits, and professional fees or 2.5 times more than its average gross income of P242.5 million.

Furthermore, the BSP said Banco Filipino paid P245 million in legal fees last year of which P131 million was spent in the fourth quarter of 2010.

Both the BSP and Banco Filipino are embroiled in legal both in the lower courts as well as the Court of Appeals and even the Supreme Court. Banco Filipino has questioned the closure order issued by the old central bank against the bank in 1985.

Another unsafe and unsound banking practice of the bank, the BSP said involved the uncollected overdue loans to Banco Filipino directors, officers, stockholders, and their related interests (DOSRI) reaching P2.2 billion or more than half of the bank’s total loan portfolio.

The BSP added that 91 percent of the loans the bank granted were past due as of Sept. 10 last year.

The central bank also revealed that Banco Filipino owes the BSP about P4.4 billion in past due loans as of September last year as chunk of the beleaguered bank’s assets are losses that have been capitalized.

It added that Banco Filipino was no longer able to settle its obligations as they fall due prompting the BSP’s Monetary Board to order its closure and placed it under the receivership of the state-run Philippine Deposit Insurance Corp. (PDIC) last March 17.

As of March 15, the BSP said the Philippine Clearing House Corp. (PCHC) returned about P798 million worth of checks to Banco Filipino as it had insufficient balanced in its demand deposit account with the central bank.

The rising number of complaints from depositors due to the failure of Banco Filipino to open its 32 branches in Metro Manila and 30 branches in the provinces last March 15 prompted the BSP to order its closure last March 17.

BSP Deputy Governor Nestor Espenilla Jr. said earlier that the central bank decided to order the closure anew of Banco Filipino after its liabilities exceeded its assets by P8.4 billion.

The bank with a popular slogan “Subok na Matibay, Subok na Matatag” was founded in 1964 by Don Tomas Aguirre.

In its website, Banco Filipino claimed that it was ordered closed by the Central Bank in 1985 due to alleged insolvency despite the bank’s outstanding performance. As early as 1966, Banco Filipino emerged as the biggest savings bank in the country with 92 branches prior to its closure.