Cagayan Rep. Jack Enrile scored the Bangko Sentral ng Pilipinas (BSP) for its apparent failure to put in measures that could have prevented the sudden closure of the Export and Industry Bank (EIB) and provide ample protection to its depositors.
Enrile said there may be something wrong with how BSP monitors transactions undertaken by banks as well as their general financial position, or may have just been too slow to act on early indications that a bank is facing huge financial trouble that could cause its closure.
The lawmaker said BSP’s failure to demonstrate to the public that it can protect depositors from bank closure and unfair business practices only encourages Filipinos not to park their money in banks.
“BSP’s apparent lackluster monitoring of EIB’s financial performance leading to its closure as well as its failure to institute measures that could have prevented the bank’s closure cast doubts on BSP’s competence in protecting depositors,” Enrile said.
“(BSP Governor Amando) Tetangco must explain to the public – especially to EIB depositors who are now having difficulty retrieving their hard-earned money from the bank – why government regulators failed to protect depositors from this sudden closure… This runs against every effort of the government to encourage the public to save.”
Enrile also noted that EIB’s sudden closure belies pronouncements by the BSP that the Philippine banking industry is “sound and stable.” The lawmaker noted that EIB’s announcement of a bank holiday came only months after the closure of Banco Filipino.
“When the BSP tells us that the banking community is healthy, why is this happening? This only shows us that there is something wrong in how BSP is monitoring banks,” Enrile said.
“BSP should review its monitoring parameters to make it more relevant to the consuming public who relies mostly on government regulators to screen bad banks from good banks and protect depositors in the event of a closure.”
Enrile also said it was highly doubtful how BSP could have allowed EIB to operate when it was a result of a merger of the failed Urban Bank and UrbanBank Investments, which were already under the receivership of the BSP and the Philippines Securities & Exchange Commission when EIB was formed in 2001.
“Instead of facing liabilities for taking depositors’ money and failing to settle their obligations, what the officers of these shuttered banks do is metamorphose into another bank, and the BSP still lets them operate,” Enrile said.
“The circumstances under which EIB was formed should have already raised red flags and triggered a deep and thorough scrutiny on the part of regulators before they allowed the bank to operate. And when it was allowed to operate, BSP should have taken steps to ensure that it had sufficient capital to back its deposits.