MANILA, JULY 30, 2011 (STAR) By Edu Punay - The Court of Appeals (CA) has overturned an earlier ruling of the Makati City Regional Trial Court (RTC) ordering the Bangko Sentral ng Pilipinas (BSP) and Monetary Board (MB) to release up to P25 billion in financial assistance package and other regulatory relief to the now closed Banco Filipino Savings and Mortgage Bank.

In a 25-page decision, the special 10th division of the appellate court ordered the dismissal of the case filed by Banco Filipino against BSP and MB and also nullified the ruling of the Makati RTC for the release of the aid.

The CA said the trial court should have not acted on the case for lack of jurisdiction.

“The RTC has no jurisdiction over the petition for certiorari and mandamus filed by Banco Filipino in Civil Case No. 10-1042. It is this court (CA) that has jurisdiction over such petition pursuant to Rule 65, Section 4 of the 1997 Revised Rules of Civil Procedure.

“Wherefore, the petition (filed by BSP and MB) is granted. The order dated Nov. 17, 2010 issued by respondent Judge Joselito C. Villarosa of the Regional Trial Court, Branch 66, Makati City, in Civil Case No. 10-1042, is annulled and set aside. In lieu thereof, judgment is hereby rendered dismissing Civil Case No. 10-1042 on the ground of RTC’s lack of jurisdiction over the same,” stated the ruling penned by Associate Justice Hakim Abdulwahid.

Associate Justices Noel Tijam and Ricardo Rosario concurred with the ruling.

Last March, the CA issued a writ of preliminary injunction against the order of Judge Villarosa directing the bank and its policy-making body, the Monetary Board, to implement its Resolution No. 1668 issued on Nov. 19, 2009.

The CA held that BSP and MB “stand to suffer grave and irreparable injury” if the trial court’s order is not enjoined pending the decision on the merits of the case.

In the assailed order, the RTC restrained both MB and BSP officers, employees and representatives “from enforcing other regulatory measures and abuses calculated to coerce petitioner (Banco Filipino) into agreeing to drop and/or withdraw its suits and damage claims against respondents (MB and BSP) and to waive future claims against respondents or their officers, employees, representatives and all persons acting in their behalf.”

The BSP and the MB were also restrained by the trial court “from continuing and committing acts prejudicial to petitioner’s (Banco Filipino’s) operation.”

In its petition, BSP and MB argued that the Makati RTC violated their right to due process when it took cognizance of the case filed by Banco Filipino despite its lack of jurisdiction.

The petitioners further argued that allowing the case to proceed would prevent BSP from performing its constitutionally mandated duty to provide policy direction in banking activities and to supervise the operations of banks.


BSP: Banco Filipino mismanaged depositors' money Business Mirror Posted at 03/28/2011 8:08 AM | Updated as of 03/28/2011 11:00 AM

MANILA, Philippines - The Bangko Sentral ng Pilipinas said on Sunday alleged mismanagement and excesses through the years brought down the Banco Filipino Savings and Mortgage Bank (BF) a second time and forced authorities to place it under receivership yet again.

Such excesses were in the form of alleged lavish spending and unpaid loans to the bank itself and the central bank, whose cumulative impact forced the decision to appoint the Philippine Deposit Insurance Corp. as receiver and take control of BF.

“The officers of Banco Filipino Savings and Mortgage Bank mismanaged money entrusted to them by their depositors by its continued lavish spending and allowing loans to remain unpaid, including billions in overdue loans granted to its stockholders, officers and related companies,” the BSP said in a statement sent by e-mail.

According to the BSP, 91% of all loans taken out as of Sept. 20, 2010, were already past due.

“In particular, uncollected overdue loans to BF directors, officers, stockholders and their related interests reached P2.2 billion, or more than half of BF’s total loan portfolio,” the BSP said.

It noted while the bank’s annual gross income over a 3-year period ending 2009 averaged only P242.5 million, BF allegedly racked up expenses for salaries, benefits and professional fees averaging P597 million, or 2.5 times more than the bank was earning.

“In 2010 legal fees alone reached P245 million, of which P131 million was spent in the last quarter,” the BSP said.

This developed even though BF owes the BSP P4.4 billion in loans outstanding as of September 2010, the BSP said.

“Banco Filipino lured depositors with interest rates way above prevailing market rates. For instance, while most banks pay interest of 1% to 2% for special savings deposits, BF paid so much more—from 6% to 13.9% for special savings deposits. As a result, BF’s interest expense was higher than its interest income. Between 2007 and 2009, its average negative net interest margin was P1 billion a year,” the BSP said.

The BSP also said a huge chunk of BF’s assets were, in fact, “losses that have been capitalized.”

“In the days before it was placed under PDIC receivership, BF was no longer able to settle its obligations as they fall due. For instance, due to insufficient balance in its demand deposit account with the BSP, the Philippine Clearing House Corp. returned about P789 million worth of BF checks as of March 15, 2011.

“Also on March 15, the BSP started receiving complaints from BF depositors in different parts of the country that they were no longer able to withdraw their deposits from BF,” the BSP said.

The BSP said that in performing its regulatory role over banks, “it always strives to strike a balance between full adherence to due process and the faithful enforcement of banking laws and prudential regulations that protect our banking system.”

In 1985 BF was ordered closed by the then-Central Bank of the Philippines on grounds of alleged insolvency, but was subsequently allowed to reopen in 1994, when the Supreme Court ruled the closure was illegal.

The bank has an P18.8-billion damage suit against the Central Bank-Board of Liquidators, or CB-BOL.

There is dispute as to whether the BSP may be held liable for the acts of the defunct Central Bank as the latter’s successor in interest. The BSP has steadfastly held they are not a successor in interest to the old central bank.

Chief News Editor: Sol Jose Vanzi

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