Monday, November 26, 2012

CA restores trust in banks


Businessworld - ‘This is the ruling that sends a message to every one that there is hope in the justice system although there are very few Tejams in the bench.’

In the pen of Justice Noel Tejam, the Court of Appeals reversed itself in the case of Banco Filipino vs Bangko Sentral ng Pilipinas. The CA overturned  a decision penned by Associate Justice Agnes Reyes Carpio that ordered the reopening of the bank and the grant of a P25 billion advance from the Philippine Deposit Insurance Corp.

The case arose from alleged arbitrary closure of BF by the Monetary Board for documented insolvency. The late Carlota Valenzuela, then head of CB’s department of supervision, documented the allegation that the value of BF’s assets at the time of closure was way below the extent of its liabilities.

Only one word describes that situation. BF was insolvent.

However, since the bank’s main offices and branches were padlocked with the help of CB’s security force, the Supreme Court concluded that the closure was arbitrary although the obligation of BF was to disprove the CB’s findings of insolvency.

BF, at some point, claimed the bank was merely illiquid, not insolvent.

Illiquidity and insolvency are worlds apart. To us the case was that simple. But BF made the claim that the assets of the bank had grown big enough to make it sound as no longer insolvent.

I followed this case from the very beginning. I cannot understand why the lawyers of the CB failed to convince the Supreme Court  that the documented insolvency was discovered after a thorough examination and at the time of closure.

The bigger “anomaly” is why the Supreme Court chose to skip the main issue of  insolvency and instead saw,  based its ruling. the “arbitrariness” that attended the closure.

The Supreme Court ordered the reopening of Banco Filipino.

BF got the Court of Appeals to order the reopening and grant of a P25 billion loan which (if memory serves) was a claim for damages but became a loan application.

BSP Governor Armando Tetangco got the authority of the Monetary Board to hire the services of new counsel, CVC Law, headed by Pancho Villazara. Banco Filipino has been having troubles with the Monetary Board and its lawyers since then.

The savings bank was ordered closed and taken over by monetary authorities after discovering violations, not exactly related to insolvency.

CA Associate Justice Agnes Reyes Carpio ruled that the bank be reopened and that its loan application of P25 billion be granted.

This was the ruling reversed by Associate Justice Noel Tejam of the same Court of Appeals.
We do not know how much further BF is willing to fight its  case. It may have what it feels are available legal remedies to leave meaningless the ruling of Justice Tejam.

This space has maintained that in many cases, the courts are to blame in the failure of the law to punish   bankers and other people responsible for the collapse of banks that in turn meant huge losses to the PDIC which pays the insurance claims of depositors.

Up to this time, the court has not resolved the alleged liability of Jose Go in the failure and collapse of Orient Bank. The courts have neither sent an erring banker to jail nor stripped him of his assets to pay for his crime.
The Supreme Court maimed the efforts of the Anti-Money Laundering Council when it ruled illegal or unconstitutional the filing of ex parte complaint against suspected money launderers without informing the respondents.

The Supreme Court never understood the simple sense that informed ahead of a search case, the respondents would transfer their deposits or withdraw them.

The Supreme Court also ruled that the claimants of just compensation – Philippine International Air Transport Corp. (PIATCO) in this specific case - need not substantiate their claims with documentary evidence.

Tomas Aguirre , founded  Banco Filipino to make it the largest among savings and thrift banks in the Philippines in its time. It would have easily qualified for a commercial banking license.

Aguirre, apart from being a good banker, was basically a promotions man. His public relations project, “customer relations models” picked pretty women manning teller windows and campaigning for deposits.
The bank grew to new heights. What many did not know was there was a brewing trouble in the Aguirre family and with one of its big stockholders, Nancy Tee.

Pedrito Aguirre once told me that his brother Tomas had always wanted to consolidate the holdings of his family. He said he sold his holdings to Tomas.

Tomas bought out a few more stockholders until he acquired effective control.

According to Pedrito, his brother Tomas forgot to buy out their sister, Remedios Dupasquiere and Nancy Tee, probably the single biggest stockholder.

After Tomas died, the business of running the bank fell into the hands of his son, Bobby.
His other son, a Harvard graduate of a degree in history, had enough sense in banking. As fate would have it, he too died.

The rest is history. The Bangko Sentral eventually discovered violations by the new management, violations serious enough to justify a second order of closure.

CA Associate Justice Reyes Carpio agreed to a reopening.  This is the ruling that Justice Tejam reversed.
This is the ruling that sends a message to every one that there is hope in the justice system although there are very few Tejams in the bench.
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