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BSP: Bad loans crushed Banco Filipino

By Michelle Remo
Philippine Daily Inquirer
First Posted 04:58:00 03/28/2011

Filed Under: Banking

MANILA, Philippines?Bangko Sentral ng Pilipinas (BSP) has defended its closure of Banco Filipino Savings and Mortgage Bank (BF), saying the bank mismanaged the deposits of its clients.

In particular, the BSP revealed that more than half, or P2.2 billion, of the bank?s outstanding loans of P4 billion had been extended to its directors, officers, stockholders and related interests (Dosri). ?Related interests? are companies with interlocking ties to a bank.

The BSP also said that 91 percent of BF?s outstanding loans were past due as of September 2010.

Moreover, BSP said that spending by BF on salaries, benefits and professional fees from 2000 to 2009 averaged P597 million a year, more than twice its gross income of P242.5 million.

Regulators said such unsound lending and spending practices led to its failure.

? ? BF mismanaged money entrusted to it by its depositors by its lavish spending and by allowing loans to remain unpaid, including billions in overdue loans granted to its stockholders, officers and related companies,? the central bank said in a statement issued Friday.

BF owed the central bank P4.4 billion in past due loans as of September 2010, the BSP added. The loans were used to address BF?s liquidity problems.

Prior to the release of the statement, BSP Deputy Governor Nestor Espenilla Jr. said the central bank was studying what cases it would file against officers of BF.

On March 17, the central bank placed BF under receivership by the Philippine Deposit Insurance Corp. (PDIC), three days after the bank failed to service the withdrawals of its clients.

Claims paid soon

The PDIC said it was expediting the process of validating deposit accounts so that deposit insurance claims could be settled soon.

Perfecto Yasay Jr., vice chair of BF, earlier protested the placement of the bank under receivership. He said the BSP was wrong in closing the bank, stressing that BF was ?not insolvent.?

He said the bank had sufficient assets, which could very well serve the withdrawals of its clients if liquefied.

Yasay blamed the BSP for not granting the bank an emergency loan, which could have temporarily addressed the lack of cash to service withdrawals on the days prior to its placement under receivership.

On March 10, the Philippine Stock Exchange delisted BF for ?continuous violation? by the bank of disclosure rules and failing to submit structured reports to the bourse.

Yasay, a former chair of the Securities and Exchange Commission, said BF had monetary claims pending against the BSP.

Banco Filipino was shut down by the old central bank during the Marcos regime in the 1980s but was reopened in 1994 after the Supreme Court ruled that its closure had been arbitrary.

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