BSP: Our lawyers will review CA ruling on reopening Banco Filipino

Source: http://www.gmanetwork.com/news/story/246533/economy/moneyandbanking/bsp-our-lawyers-will-review-ca-ruling-on-reopening-banco-filipino?ref=section_latest

In reaction to the decision of the Court of Appeals ordering it to reopen the defunct Banco Filipino Savings and Mortgage Bank, the Bangko Sentral ng Pilipinas (BSP) said late Wednesday that it will evaluate its options.

"Our lawyers are reviewing the decision of the Court of Appeals to determine the remedies available to us. Beyond this, we have no further comments," said BSP Deputy Governor and General Counsel Juan de Zuniga Jr. stressed.

In the 50-page decision promulgated on Jan. 27 but divulged to the news media only on Wednesday, the CA said it did “not see any proof that Banco Filipino committed unsafe banking practice and whether its attention was called to rectify or remedy the same.”

“We also do not see from the records if any administrative sanction as prescribed above had been imposed by respondents BSP and MB to any of the bank's officials and employees,” the ruling read.

Alleged Ponzi operations

When it was shut down on March 17, 2011 Banco Filipino had 177,652 depositors and 97% of them had deposits fully covered by deposit insurance of up to P500,000 each.

In a statement issued back in April 2011, the BSP said its 170-page “Comment/Opposition” filed with the CA, pointed out that “Banco Filipino was operating as a pyramid or Ponzi scheme in the past years, using new deposits to pay old ones, and with its officers paying themselves and their lawyers much more than the bank was earning.”

“BF was being run to the ‘extreme prejudice of its depositors’ since it was violating various laws and BSP regulations, including BF's refusal to submit periodic financial statements for the few years to hide its true financial weaknesses,” the BSP added.

Liquid or insolvent?

Banco Filipino vice chairman Perfecto Yasay said BF had P31.4 billion worth of properties that can be used for the rehabilitation plan it wanted to implement but which the Bangko Sentral ng Pilipinas (BSP) rejected.

Yasay said these assets are more than enough to settle the P23.8 billion in deposit liabilities it had.

“We clearly showed a positive asset valuation of P1.6 billion. The law says our assets must equal or [be] in excess of our liabilities in order for the bank to be declared solvent," Yasay explained.

But BSP Deputy Governor Nestor Espenilla Jr. said BF was insolvent at the time of its self-declared bank holiday because its liabilities exceeded its assets by P8.4 billion.

Lawyers' fees

The BSP also said Banco Filipino paid high remuneration to its lawyers, led by Perfecto Yasay, former chairman of the Securities and Exchange Commission, and Harry Roque. The payments totaled P245 million in 2010 alone, according to the banking regulator.

With BF average gross income for the years 2007-2009 amounting to P242.5 million, the BSP the bank’s funds were “insufficient to pay the average interest expense of P1.1 Billion for the same period.”

“This was because Banco Filipino, to fund its operations and pay its officers, consultants and lawyers, offered depositors 6%-13.9% interest for special savings deposits, while most banks were paying only 1.8%-3.3%,” the BSP said.

Roque & Butuyan Law Offices said in a statement that BF enlisted Roque's services only in July 2010, and that the legal fees his firm received from Banco Filipino do not even amount to 1 percent of the P245 million "maliciously" imputed by the central bank.

“In fact, Roque stated that his firm has legal fees unpaid by Banco Filipino amounting to half a million pesos," according to the statement, explaining that the BSP has access to Banco Filipino documents declaring the amounts that the bank paid his firm.