Banco Filipino

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Villalon, Riel P.

Case analysis: Banco Filipino Closure

The Banco Filipino was Closed by the Banko Sentral ng Pilipinas claiming that Banco Filipino failed to service withdrawals and fund issued checks because the liabilities exceeded its assets which is against Philippine law which states that a bank's assets must equal or be in excess of its liabilities and despite of considerable time given by Bangko Sentral ng Pilipinas to the Board/Management of Banco Filipino they have failed to restore its financial health and viability. The Monetary Board decided to prohibit Banco Filipino from doing business in the Philippines and to place its assets and affairs under receivership. The legal basis of Banko Sentral ng Pilipinas for the closure of the Banco Filipino is stated in section 30 of the REPUBLIC ACT NO. 7653. According to SEC. 30. Proceedings in Receivership and Liquidation.-Whenever, upon report of the head of the supervising or examining department, the Monetary Board finds that a bank or quasibank: (a) is unable to pay its liabilities as they become due in the ordinary course of business: Provided, That this shall not include inability to pay caused by extraordinary demands induced by financial panic in the banking community; (b) has insufficient realizable assets, as determined by the Bangko Sentral, to meet its liabilities; or(c) cannot continue in business without involving probable losses to its depositors or creditors; or (d) has willfully violated a cease and desist order under Section 37 that has become final, involving acts or transactions which amount to fraud or a dissipation of the assets of the institution; in which cases, the Monetary Board may summarily and without need for prior hearing forbid the institution from doing business in the Philippines and designate the Philippine Deposit Insurance Corporation as receiver of the banking institution. Some depositors may receive the insurance proceeds of their deposits within a week after PDIC has taken over the bank, while others need to meet some requirements first. The depositors whose accounts have balances amounting to P5,000 and below, who do not have outstanding loans, and whose address is current in the bank records, "need not file their deposit insurance claims," according to Bangko Sentral ng Pilipinas. The Insurance payment "will be made through postal money order (PMO) mailed directly to depositors via registered mail. These PMOs can be encashed at any of the over 1,400 postal offices and over 300 LandBank of the Philippines branches nationwide," the PDIC said. Being a thrift bank that cater to small depositors, these

clients who will receive their money immediately account for 53% of the account holders and all others are required to file their deposit insurance claims with the PDIC. After the Closure of Banco Filipino, the stockholders of BF filed a petition for the bank to be reopened after being ordered closed by the Bangko Sentral ng Pilipinas. The appellate court denied the petition filed by BFs stockholders to stop the implementation of the Central Banks order to place it under receivership. The appellate court said in a resolution report obtained that it found no merit to the request of the closed thrift bank. After having considered and deliberated on the petition and the comments of the respondents, as well as the respective discussions and argumentations stated therein, we do not find sufficient cause to grant it, the CA said in the resolution penned by Associate Justice Agnes Reyes-Carpio.

MANILA, Philippines (UPDATE) The Court of Appeals has denied the petition of Banco Filipino Savings & Mortgage Bank (BF) to be reopened after being ordered closed by the Bangko Sentral ng Pilipinas earlier this year. The appellate court denied the petition filed by BFs stockholders to stop the implementation of the Central Banks order to place it under receivership. The appellate court said in a resolution report obtained by the media on Tuesday , that it found no merit to the request of the closed thrift bank. After having considered and deliberated on the petition and the comments of the respondents, as well as the respective discussions and argumentations stated therein, we do not find sufficient cause to grant it, the CA said in the resolution penned by Associate Justice Agnes Reyes-Carpio. BSP merely protecting the public The CA said the Bangko Sentral ng Pilipinas was right to have placed BF under receivership, noting that it is the role of the regulator to protect the public against problem banks. It added that the regulatory action against a bank suffering from financial woes is necessary to maintain public confidence on the banking system. Unless adequate and determined efforts are taken by the government against distressed and mismanaged banks, public faith in the banking system is certain to deteriorate to the prejudice of the national economy itself, not to mention the losses suffered by the bank depositors, creditors, and stockholders, who all deserve the protection of the government, the CA said. The mandate of respondents is to regulate and supervise banks to ensure that the later have sound lending practices and practice good corporate governance. Being a

government entity, respondents acts are prima faciely presumed to be regular. This being the case, we do not see any reason at this time to prevent respondents from doing their task, the appeals court added.

Why was Banco Filipino closed by BSP Legal Basis fo BSPs action What happened to the depositors of the BF What was the action taken, if any Is BSPs action proper

However Banco Filipino claims that it had 31.4 billion worth of properties and 23.8 Billion pesos worth of liabilities leaving the savings and mortgage bank with 1.6 billion pesos worth of positive assets showing that its assets according to Banco Filipino are more than its liabilities which could have been used in its planned rehabilitation. Meanwhile, the Philippine Deposit Insurance Corp. (PDIC) has revealed that they will start paying next month Banco Flipino depositors whose accounts had at least P10,000 when the bank went on a holiday. PDIC executive vice president Cristina Orbeta said it has settled 53 percent of the closed banks deposit liabilities. These were accounts that had P5,000 or less when Banco Filipino shut down.[2]

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