Export and Industry Bank collapses

MANILA, Philippines [UPDATED] – The buyer of Urban Bank, one of the Philippines’ most high profile bank closures, itself collapsed. 

On Friday, April 27, Export and Industry Bank, also known as Exportbank, declared a bank holiday a day after the policy-making body of the Bangko Sentral ng Pilipinas (BSP) ordered the state deposit insurer to place the commercial bank under receivership. 

The Monetary Board cited the bank’s “inability to meet obligations as they become due because of insufficient realizable assets to meets its liabilities and inability to continue its business without involving probable losses to its depositors and creditors.”

Exportbank acquired Urban Bank in 2001 after the latter collapsed. 

Previously, the country’s biggest bank, Henry Sy-led Banco de Oro Unibank Inc. (BDO), was eyeing to acquire the banking operations of Exportbank.

Legal issues

“For some time now, the Export and Industry bank was already having problems. However, it was negotiating a rescue package from one of the big banks. That deal did not happen,” said BSP Deputy Governor Nestor Espenilla Jr. in a phone interview with ANC.

Espenilla was talking about BDO, which was in negotiations to acquire Exportbank for about 2 years.

The PDIC gave its thumbs up to the deal in April last year. An integration process of the operations of the two banks started, but the deal was never sealed.

Espenilla, in a press briefing on Friday, said the deal caved in because BDO didn’t want to get entangled in legal issues involving Exportbank.

Filing of claims

PDIC President Valentin Araneta said they have taken over Exportbank on Friday, and will start the deposit claims process next week.

He said they will hold forums for some 50,000 depositors of the bank beginning May 2. Under the law, only deposits worth P500,000 and below are covered by insurance.

“As statutory receiver, PDIC physically takes control of the bank, all bank records and assets will be inventoried, then we’ll proceed with the processing of settlement of claims,” he also told ANC.

He said part of the process is probing whether officials of the bank are liable for anything.

“That’s a normal process for the receiver, going over all the records and the conduct of all the affairs of the bank.”

Exportbank clients with deposits of P10,000 and below, and who have no outstanding obligations with the bank, need not file their claims. “Payments will be made to them,” said PDIC deputy spokesperson Maria Leonida Fres-Felix.

Those with deposits above P10,000 will have to file their claims. Claim forms will be distributed during the depositors’ forums.

They need to attach copies of evidence of their deposits (e.g. passbooks, certificate of deposits, used checks and bank statements), as well as original and photocopies of two valid IDs.

Felix said they are no venues for the forums yet, although they will be held either in bank premises or stadiums and halls near bank sites.

Banking industry ‘stable’

Exportbank’s closure is an isolated case and will not affect the banking industry, which remains stable, the BSP assured.

“The overall Philippine banking system remains sound and stable with ample liquidity and high level of capitalization,” the BSP said.

“The closure of the bank is not expected to adversely affect the Philippine banking system, considering its relatively small size,” it added.

As of end-September 2011, banks’ capital adequacy ratio (CAR) stood at an average of 16.44%, well above the 10% minimum required by the central bank.

CAR determines if a bank has enough capital to survive any financial shock.

Exportbank liabilities

Meanwhile, Exportbank, with its ballooning obligations, had been on a lookout for a white knight for years.

Its balance sheet as of September 30, 2011 showed it had total deposits of P17.17 billion and a non-performing loan ratio of 21.88%, higher than industry average.

Its total liabilities amounted to P27.02 billion, barely covering its total assets of P27.69 billion.

Just last March, the bank tried to raise capital by selling its 18.4% stake in non-core business, listed property developer Arthaland Corp., for P178 million.

Exportbank is also listed in the local stock exchange with public investors owning around 11.5% stake. – Rappler.com