BSP shuts down Export Bank for liquidity problems

The Bangko Sentral ng Pilipinas (BSP) has ordered the closure of Export and Industry Bank Inc. (EIB), which has 50 branches and P16 billion in deposits, and placed it under the receivership of the  Philippine Deposit Insurance Corp.  after the bank suffered liquidity problems.

A ranking BSP official said the central bank’s decision to order on Thursday the shutdown of EIB and to place it under PDIC receivership came after officials of the bank notified regulators that it no longer had sufficient liquidity to service maturing time deposits.

“The officials of the bank were forthright with us [regulators] and told us that they could no longer service the obligations that were about to mature,” BSP Deputy Gov. Nestor Espenilla Jr. told a press briefing yesterday.

Bank holiday

EIB officials said they had intended to declare a bank holiday last Thursday since they were aware that the bank would no longer be able to service maturing time deposits.

About P700 million to P800 million worth of time deposits in EIB were supposed to mature yesterday and on Monday.

Espenilla said that when the BSP learned that the bank was planning to declare a bank holiday, it decided to immediately place the bank under receivership of PDIC to have an orderly process of dealing with the bank’s depositors.

EIB had exerted efforts in the past to fix its financial problems but failed.

Banco de Oro, the largest bank in the country in terms of assets, was earlier planning to buy EIB.

But talks between the two parties eventually failed when the management of BDO finally decided that taking over the troubled bank would not be a wise move, the BSP said.

No buyer

The move to place EIB under receivership also came after the BSP got confirmation from BDO that the latter was no longer interested in buying the bank.

“BDO was trying to see how it can come in, but it also has to take into account its responsibility to its own shareholders. BDO conducted due diligence on EIB, and then decided it was no longer interested. A takeover of EIB was deemed to be too much of a problem for them [BDO],” Espenilla said.

EIB was formerly Urban Bank which was rehabilitated following takeover of new owners, who eventually also sold the bank.

As of end-2010, the biggest shareholders of the publicly listed bank were the following: Ridderbrecht B.V  of Netherlands which owns 11.62 percent, Lead Bancfund Holdings Inc. (10.03 percent), Apex Bancrights Holdings Inc. (10.03 percent), Extra Year Investments Ltd. (9.5 percent), Asiawide Refreshments Corp. (8.45 percent), Medco Asia Investments Corp. (7.86 percent),  Alfredo M. Yao (6.34 percent), Zest-O Corp. (5.92 percent), San Miguel Corp. (4.96 percent) and King Mild Ltd. (2.64 percent).

The bank’s president was Jaime Gonzales while its chair was Juan Victor Tanjuatco.

According to an earlier disclosure, EIB posted a net loss of over P700 million in the first three quarters of 2011.

‘Sad thing for us’

“The failure of the bank, despite efforts in the past to fix it, is a sad thing for us [regulators]. We wish the problems of the bank were fixed, but sometimes circumstances that force a bank to lose happen,” Espenilla said.

In a separate statement, PDIC said it was committed to promptly servicing the claims of the depositors.

PDIC said EIB clients with deposits of P10,000 or below would get their deposits back starting next month.

EIB had P15.98 billion in deposits covering 50,052 deposit accounts when it was closed. Of the total deposit accounts, 62 percent or about 31,000, have deposits of P10,000 or below.

Under PDIC rules, small depositors automatically get back their money after a bank is placed under receivership. Those with deposits of over P10,000 will have to file claims for deposit insurance with PDIC.