MANILA, Philippines (3RD UPDATE) - Export & Industry Bank, a commercial bank with 50,000 depositors, declared a bank holiday on Friday.
On Thursday afternoon, Export Bank informed the Bangko Sentral ng Pilipinas (BSP) it was unable to meet its maturing obligations. The BSP said the EIB president sent a letter, indicating it is surrendering its bank operations to the central bank and declaring a bank holiday effective April 27.
By Thursday evening, the Monetary Board (MB) issued a resolution placing the bank under receivership, invoking Section 30 of Republic Act 7653 or the New Central Bank Act.
In a statement, the MB cited the bank's "inability to meet obligations as it becomes due, due to insufficient realizable assets to meets its liabilities and inability to continue its business without involving probable losses to its depositors and creditors," as reasons why it was placed under receivership.
In an interview on ANC on Friday, BSP deputy governor Nestor Espenilla Jr. said EIB has been having problems for some time now.
"EIB has been having problems but it was negotiating a rescue package from one of the big banks. However, the deal did not happen and on that basis, that was a consideration to move quickly," he said.
The bank he was referring to was BDO Unibank, which secured approval from the PDIC to buy EIB's assets and liabilities last year.
BDO informed the BSP that the deal fell through due to ExportBank's unresolved legal issues.
"BDO informed us they no longer wished to pursue the transaction because of unresolved legal issues involving EIB which they didn't wish to get dragged into plus the fact that delays caused further financial deterioration in EIB that made it unattractive for them to continue," Espenilla said, in a text message to ABS-CBN News Channel.
He said the BSP also assessed that EIB was already insolvent, since its reported assets of P25 billion were not enough to meet its liabilities. He did not give details on EIB's liabilities.
Records show that EIB has 50,052 depositors and 50 branches, mostly in Metro Manila.
Despite EIB's closure, the BSP assured the banking industry remains sound and stable, with ample liquidity and high level of capitalization.
Espenilla said EIB is one of the smallest commercial banks in the system, and its total asset size is relatively small at 0.3% of the total banking industry.
"That's why we think this is going to be largely contained. Industry has been aware for some time now that the bank has financial problems, and its interface with the banking industry has been fairly restricted," he said.
EIB was the white knight of the troubled Urban Bank, which declared a voluntary bank holiday in 2000 for its failure to meet withdrawals. In 2001, EIB merged with Urban Bank.
PDIC takes over ExportBank
The Philippine Deposit Insurance Corp. (PDIC) has already taken over Export & Industry Bank as of Friday to implement the MB resolution. "As receiver, PDIC shall gather all the assets of the closed bank and verify and validate all bank records," it said.
PDIC President Valentin A. Araneta assured depositors that the PDIC will pay insurance on all insured and valid deposit accounts.
The PDIC is targeting to start paying the accounts with balances of P10,000 and below, which comprise 62% of the bank’s total deposit accounts of 50,052, by end of May.
Holders of these accounts who have no outstanding loans and who have updated their addresses in the bank in the past year, need not file deposit insurance claims.
Depositors with account balances of more than P10,000, will have to file deposit insurance claims. The claim forms distributed at the Depositors Forums to be conducted around the nation starting May 2.
Servicing of claims for accounts of over P10,000 are expected to begin not later than end of June.- With Coco Alcuaz, ABS-CBN News Channel