Trade blocs support BSP move to close Banco Filipino

Trade blocs support BSP move to close Banco Filipino

By Amy R. Remo
Philippine Daily Inquirer
First Posted 22:15:00 04/03/2011

MANILA, Philippines—Key business groups collectively heaved a sigh of relief when the Bangko Sentral ng Pilipinas decided to shut down Banco Filipino.

The groups—Financial Executives Institute of the Philippines (Finex), Makati Business Club (MBC) and Management Association of the Philippines (MAP)—said the BSP helped preserve the public’s confidence in the banking sector by taking action on institutions suspected of dubious dealings.

Industry players stressed the importance of preserving public confidence in the banking sector, which depends on depositors to generate resources used for lending and other investment activities.

“The presence of a regulator is meant to prevent loss of confidence in the banking system that can put the proper functioning of the economy at risk,” the three business groups said in a joint statement released Friday.

The statement was issued shortly after Banco Filipino Savings and Mortgage Bank filed charges against BSP officials before the justice department.

Banco Filipino took legal action on Friday to protest the alleged unwarranted closure of its branches. The thrift bank also accused BSP officials of graft.

The BSP, in turn, filed legal charges against Banco Filipino officials. The regulator accused the bank officials of violating various banking regulations, including extension of huge loans to owners, directors and officers of the institution.

The Monetary Board of the BSP decided on March 17 to place Banco Filipino under receivership of the Philippine Deposit Insurance Corp., three days after the institution declared a bank holiday, unable to service withdrawals of clients.

This was the second time Banco Filipino was ordered closed. The first was in 1985, when the old central bank placed the savings bank under receivership for insolvency.

The old central bank was criticized for the closure of Banco Filipino, especially after the Supreme Court ruled in 1991 that the closure was illegal and was done in an arbitrary manner with abuse of discretion.

Banco Filipino said the BSP is committing the sin of its predecessor by making the same mistake. The thrift bank claims it is not insolvent, and has assets to meet its obligations.

But Finex, MBC and MAP firmly supported the BSP decision, saying that the closure of Banco Filipino was an appropriate move “and deserves to be accorded the presumption of regularity.”

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