MANILA, OCTOBER 13, 2003  (STAR) By Des Ferriols  - The Bangko Sentral ng Pilipinas (BSP) has opened a P10-billion emergency loan facility for United Coconut Planters Bank (UCPB) as the government-controlled bank struggles to get back on its feet after heavy withdrawals depleted its resources earlier this year.

Well-placed sources revealed over the weekend that last month, UCPB finally began to recover and beef up its deposit base by about P10 billion, but the recovery cost the bank P30 billion.

Various sources confirmed that after getting P20 billion from the Philippine Deposit Insurance Corp. (PDIC) from May to August, UCPB went to the BSP to open the emergency loan facility. UCPB has drawn P7.5 billion from it so far.

According to one source, UCPB used up the P20 billion from PDIC to finance heavy withdrawals that occurred shortly after the bank reached an agreement with PDIC for its takeover and rehabilitation.

Speaking on condition of anonymity, the source said UCPB was well on its way toward stability when PDIC stepped into the picture, but added that a series of negative media reports led to a systematic withdrawal of funds by UCPB’s corporate clients.

"That’s why you didn’t see any lines forming outside UCPB branches," the source said. "It was only a select group of depositors that had the capacity to make things very difficult for UCPB."

Sources said that in December 2002, UCPB’s deposit base stood at P91 billion. By August, this had dwindled to P56 billion to P58 billion — a figure that includes attempts to beef up the base funds with deposits from the Bureau of Treasury (BOT) and the PDIC infusion.

The corporate withdrawals, sources said, were spurred by reports from the Presidential Commission on Good Government (PCGG) that UCPB had given out behest loans to business interests identified with businessman Ramon Ang, chief operating officer of San Miguel Corp. (SMC) and the right-hand man of tycoon Eduardo Cojuangco.

The so-called behest loans later turned out to be current, fully secured and performing transactions, but sources said the PCGG statement caused enough "friction" between UCPB and SMC, one of the bank’s biggest corporate clients.

"The PDIC infusion had some success putting out the fire, but, as soon as that story came out, there was another one," said a source intimately familiar with the rescue of UCPB. "That (fire) was harder to put out because UCPB had no money left. It had already used up the PDIC infusion. It needed another loan."

"SMC never actually withdrew any of its accounts and the bank still has the company’s payroll account," said another source. "But, from then on, SMC stopped renewing its time deposits when they matured. Then their suppliers in the provinces started pulling out."

The source said UCPB also saw the pullout of other corporate and business accounts, mostly from Filipino-Chinese business interests. "There was a suspicion that the withdrawals were orchestrated."

The source added that "it is also a known phenomenon in Philippine banking that (Filipino-Chinese) do not like to bank with government-controlled banks."

As a result, sources said, UCPB used up all of the P20 billion infused by PDIC to finance the withdrawals and had no cash left to support its operations and capital requirements. "That’s why it needed more money from the BSP."

Another source told reporters that UCPB was trying to get permission from the BSP to restate its financial statement and reverse the provisions for bad loans that were originally stated by its external auditor, SGV & Co.

PDIC hired its own auditor, KPMG, to look into UCPB’s finances and it suggested the restatement of provisions which would instead be staggered over a period of 10 years.

This is allowed under the rules of the BSP, but only if the bank is under rehabilitation and UCPB had to secure special permission from the Monetary Board.

Sources said that reverses that have not been booked totaled P14 billion and, when booked, UCPB’s bottom line would look better.

Reported by: Sol Jose Vanzi

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