NEWSFLASH

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URBAN BANK UNDER RECEIVERSHIP

Manila, April 27, 2000 - The Bangko Sentral ng Pilipinas (BSP) ordered yesterday Urban Bank placed under the receivership of the state-run Philippine Deposit Insurance Corp. (PDIC).

BSP Gov. Rafael B. Buenaventura said PDIC's takeover of Urban Bank will allow it to go through the bank's books to enable the institution to reimburse its small depositors.

The PDIC implemented a swift closure and takeover of the bank yesterday after the Monetary Board, the policy-making body of the BSP, approved its placement under receivership.

Buenaventura said the bank was forced to service about P2.5 billion in withdrawals over two weeks -- an amount equivalent to 25 percent of its assets, after it was forced to downgrade itself into a thrift bank.

The downgrade stemmed from its failure to meet increased capitalization requirements.

In a notice to the Philippine Stock Exchange, the bank said that withdrawals over four weeks reached P4.5 billion, excluding another P1 billion on Tuesday, which prompted it to close indefinitely.

Buenaventura said the BSP offered an emergency loan to help Urban Bank meet the bank run, but its management instead elected to declare a bank holiday on Tuesday.

"They elected to preserve their assets so as to be able to pay the bank's liabilities," he added.

Also placed under receivership is the Urban Development Bank, a thrift bank subsidiary of Urban Bank.

Another subsidiary, Urbancorp Investment Corp., an investment house without quasi-banking functions, has declared a suspension of payments and has requested the BSP and the Securities and Exchange Commission (SEC) to appoint a rehabilitation receiver for the company.

However, the other subsidiaries of Urban Bank continue to operate independently and are not covered by the receivership. These include Urbancorp Insurance Brokers Inc., Urbancorp

Realty Development Inc. and Urbancorp Travel Services Inc.

The PDIC, in a statement, said that it will start paying off insured deposits on May 2, 2000.

Deposits P5,000 and below will be paid in full while deposits P5,000 and above will be paid equivalent to 25 percent of the deposit liabilities or P5,000 whichever is higher but not to exceed P25,000.

Full payment of maximum insurance of P100,000 will be made as soon as the examination of records is completed.

The PDIC advised clients of Urban Bank that payments of loans and other obligations to the bank should be made only to the PDIC deputy receiver.

It also cautioned all depositors and borrowers of Urban Bank that its former officers and employees are no longer authorized to transact business with them.

Monetary authorities are shopping around for new investors to take over Urban Bank, which was forced to shut down after suffering heavy withdrawals, Buenaventura said

"We are going to hire an investment banker to try and sell the bank," he said in a radio interview.

Financial advisers which were tapped to consider Urban Bank for possible repackaging and sale to other foreign interested parties include Solomon Brothers and Chartered Bank.

The BSP governor said that "from all indications, the bank's assets are in order" and that the government hopes to be able to convince investors to acquire Urban Bank.

He cited a recently passed banking law which opened the industry to foreign players, including 100 percent takeovers of existing domestic lenders.

Urban Bank said it is still pursuing merger talks with a medium-sized Banco de Oro. Buenaventura said Banco de Oro will be a good fit as it is three times bigger than Urban Bank in terms of capital.

"Discussions on the details of the proposed merger with Banco de Oro and Urban Bank are ongoing," Urban Bank said in its notice to the stock exchange.

Nestor V. Tan, Banco de Oro president, reacting to questions on their plans on Urban Bank, said that "we are still interested in Urban Bank and the holiday declared by Urban will give us more time to undertake additional due diligence for proper valuation."

Urban Bank suffered liquidity problems four weeks ago when the impact of Westmont Investment Corp.'s (Wincorp) inability to pay its maturing borrowings was fully felt. This was compounded by the ASB Realty debacle plus Citibank's refusal to pay maturing C&P Commercial papers which caused jitters among the Chinese community.

The bank said the jitters were heaviest at Binondo's Chinatown and other areas, which are Chinese dominated.

In the first two weeks alone, Urban experienced total pull-outs of P800 million from Binondo branches. In the next two weeks, total pull-outs amounted to P4.5 billion.

In a statement, the bank said: "No medium sized commercial bank can withstand such total pull-outs/withdrawals without collapsing or folding up. And yet, Urban closed the day prior to the bank holiday declaration with a positive balance on its current account with BSP."