Yasay insists Banco Filipino not insolvent

By Antonio Siegfrid O. Alegado, BusinessWorld

Posted at Mar 23 2011 04:08 AM | Updated as of Mar 23 2011 12:08 PM

MANILA, Philippines - Thrift bank Banco Filipino Savings and Mortgage Bank yesterday asserted it had enough assets to cover liabilities and should not have been shuttered by the central bank.

“We are not insolvent,” Banco Filipino Vice-Chairman Perfecto R. Yasay told reporters yesterday after an inquiry by the House banks and financial intermediaries committee on Banco Filipino’s closure by the Bangko Sentral ng Pilipinas (BSP).

A document that Mr. Yasay gave to BusinessWorld listed real properties worth a total of P32 billion, which he said was more than enough to cover P19.4 billion -- including P14.9 billion in deposits -- in liabilities.

The document was signed by licensed appraiser Raul R. Francisco and was dated March 21, 2011.

“Banco Filipino can service its depositors given these assets,” Mr. Yasay claimed, refuting the BSP’s contention it was insolvent.

“Based on our valuation, we have net assets of around P20 billion,” he added.

He said the central bank’s refusal to extend Banco Filipino an emergency loan caused its problems.

Emergency loans are provided by the BSP to banks suffering a bank run if this bank can prove it is not insolvent.

At the committee hearing, however, the central bank said that based on its examination as of Sept. 30, Banco Filipino’s assets had a negative net realizable value of P8.4 billion,making it impossible to pay liabilities as they fell due.

The BSP also said Banco Filipino had a capital adequacy ratio (CAR) of -142%, meaning the bank did not have capital to cover money it has lent out. The central bank requires a 10% minimum CAR.

Past due loans comprised 91% of total loans. Moreover, the central bank discovered that most loans -- P2.2 billion or 54% of the Banco Filipino’s total loan portfolio were DOSRI loans or loans extended to the bank’s directors, officers, stockholders and related interests.

The bank also had P4.4 billion in past due loans from the central bank.

The BSP placed Banco Filipino under the receivership of the Philippine Deposit Insurance Corp. last Thursday when it could no longer service deposits.

Banco Filipino has since filed for a temporary restraining order at the Court of Appeals to stop the state deposit insurer from taking over its assets.

Mr. Yasay, however, said the central bank’s appraisers might have used different values when they accounted for the bank’s assets.

The House banks and financial intermediaries committee adjourned the meeting, saying that Banco Filipino and the central bank should explain the basis for their valuation of the thrift bank’s assets.

Last week’s closure of Banco Filipino was the second for the bank.
The then Central Bank of the Philippines ordered Banco Filipino shut in 1985, saying the bank was unable to pay its loans. The Supreme Court ruled the closure illegal in 1991, allowing Banco Filipino to re-open in 1994.

The bank subsequently filed an P18.8-billion damage suit against the Central Bank Board of Liquidators and the BSP.

Mr. Yasay had claimed the BSP did not want to provide P25 billion in rehabilitation funding ordered by a court as well as the P3 billion emergency loan it had requested because of the bank’s refusal to drop the lawsuit.