BSP, SEC set probe of Urbancorp Investment

The Bangko Sentral ng Pilipinas (BSP) and the Securities and Exchange Commission (SEC) will investigate the transactions of Urban Bank's failed investment house, Urbancorp Investment Corp., BSP Gov. Rafael B. Buenaventura said yesterday.

He said SEC Chairman Lilia Bautista has agreed to allow the BSP to join the investigation as the central bank, under current laws, has no direct authority to supervise or examine the transactions of investment houses.

The BSP is taking an active participation in the investigation of Urbancorp Investment because the firm's financial transactions are suspected of having caused the downfall of Urban Bank.

Initial investigations and findings of the BSP show that Urbancorp initially suffered liquidity problems as most of its investments were in non-earning real estate assets.

When investors of Urbancorp started seeking payments for their investments, the investment house reportedly sought the assistance of Urban Bank. The bank was forced to fund some of the withdrawals that should have been the responsibility of the investment house.

The BSP noted with suspicion that Urban Bank's common trust funds (CTFs) were going down even though the bank was claiming that it was suffering heavy withdrawals. There are also findings that at least one loan was actually diverted to Urbancorp.

Under the law, investment houses are regulated and supervised by the SEC as a corporation and not as a financial institution.

Earlier, the BSP said it was planning to take over the supervision of investment houses without quasi-banking licenses from the corporate watchdog as part of reforms aimed at curbing financial malpractices.

Investment houses, while they do not accept deposits directly, accept investments which they then lend or invest in real estate, securities or extend as loans.

Most investment houses are engaged in financial deals but are not supervised by the BSP. -