BSP finds channeling of funds by Urban Bank

The Bangko Sentral ng Pilipinas (BSP) said Urban Bank may have channeled some of its funds to help its investment house, Urbancorp Investment Corp.

BSP Gov. Rafael B. Buenaventura and Deputy Gov. Alberto Reyes Jr. revealed last Friday that based on the BSP's examination of Urban Bank's financial transactions, it appears that Urbancorp Investments initially suffered liquidity problems because most of its investments were in real estate assets.

When investors of Urbancorp Investments started asking for their investments and Urbancorp could not liquidate, the bank appeared to have channeled funds to the investment house.

BSP noted some discrepancies in Urban Bank's common trust funds (CTFs) which appeared to have drastically dropped.

Urban Bank officials had told media that the bank's liquidity problems had built up and worsened over a five-week period as the bank noted a trend of heavy withdrawals.

The BSP finds such an explanation suspicious since it was the CTFs which posted the declines rather than the deposit accounts.

BSP officials believe that a series of heavy withdrawals over a five-week period is not likely to go unnoticed. They cited the case of the two-day heavy withdrawals that International Exchange Bank and Philippine Bank of Communications experienced.

Buenaventura also noted that Urbancorp Investments' financial deals were even larger than Urban Bank's.

Based on initial reports, Buenaventura said, Urbancorp Investment is seeking a suspension of payments amounting to anywhere from P8 billion to P10 billion. Urbancorp Investments, which is not under the supervision of the BSP, is seeking debt relief from the Securities and Exchange Commission.

Urban Bank declared a bank holiday on April 25 effective April 26.

On that same day, however, the BSP Monetary Board ordered that Urban Bank be placed under receivership of the Philippine Deposit Insurance Corp. (PDIC).

Records of Urban Bank were immediately secured to prevent any loss. Buenaventura said it could not yet be certain if officials of Urban Bank would be held liable for the irregular transactions. -