BSP justifies closure of Banco Filipino

MANILA, Philippines - Bangko Sentral ng Pilipinas (BSP) Deputy GovernorNestor Espenilla justified yesterday the central bank’s decision to padlock Banco Filipino, saying it was intended to protect the bank’s more than 100,000 depositors.

He told the House committee on banks chaired by Leyte Rep. Sergio Apostol that BSP discovered in the course of an audit last December that Banco Filipino had a negative net worth and had therefore become insolvent.

He said the bank had assets worth P25 billion, “but these included P12 billion in accumulated losses that were made to appear as part of capital, and P3 billion in properties that are not allowed under banking laws to be part of capital.”

He said the P12 billion in losses that were included in the bank’s assets “were ampaw, meaning they had no value, their value was zero.”

He said when the worthless assets are deducted from its total capitalization, the bank would have a negative net worth of about P8 billion since it owed depositors and other creditors P23 billion.

Surigao del Sur Rep. Philip Pichay said what Banco Filipino in effect did was to “window-dress” and overstate its finances.

“That’s what happened in the case of Enron (in the US), and those responsible for the window-dressing in that company were sent to jail. That’s what should be done here,” he said.

But Banco Filipino president Teodoro Arcenas disputed Espenilla’s statements, saying they have properties valued by independent appraisers at P31 billion.

Camarines Sur Rep. Luis Villafuerte, whose wife is a member of the Monetary Board, the BSP’s governing body, came to the closed bank’s defense, saying the booking of accumulated losses “is allowed to be deferred and such losses are also allowed to be spread over several years.”

He said if such huge amount of losses are booked and reflected in the bank’s financial statements immediately, they would “impair its capital.”

The BSP has turned over Banco Filipino to the Philippine Deposit Insurance Corp. (PDIC) for liquidation. The PDIC has started paying small amounts to Banco Filipino depositors.