Urban Bank execs face estafa charges

Top officials of the defunct Urban Bank and its affiliate, Urbancorp Investments Inc. are now neck-deep in the technicalities of the three estafa cases filed by banking authorities, leaving no room for the immediate resolution of the case.

Bangko Sentral ng Pilipinas (BSP) general counsel Juan de Zuniga said that the Makati Regional Trial Court still has to rule on the motion to quash filed by the respondents, holding up the entire proceedings.

The BSP filed the case against Urban Bank chairman Arsenio Bartolome and president Teodoro Borlongan for allegedly using the bank’s money amounting to P4.5 billion, to bail out UII investors.

When the bank’s problems became apparent, UrbanBank declared a bank holiday on April 25, 2000 following heavy withdrawals. However, many depositors were left out in the cold unable to get their money.

The BSP reported that the bank used about P1 billion of its depositors’ money to buy UII trash receivables just hours before it declared a holiday. The day before, the bank spent P745 million while P2.8 billion was spent on April 19 to buy UII’s receivables.

Although the UII receivables were classified as poor to bad debts, the bank bought them at full face value, plus interest that the borrowers were unable to pay.

The crisis ultimately forced the BSP to close down the bank on April 26 to preserve its remaining assets and prevent any attempt to alter documents. The central bank said it was not legally bound to rescue UII and that Urban Bank did not have to go on holiday had the depositors’ money not been used to save UII investors.

Weeks before the holiday, Urban Bank had been in negotiations with the BSP for a P3.5-billion emergency loan. However, bank officials were not able to put up first class collateral as required by law.

Bank officials claimed there was nothing "irregular" about the bank’s move to purchase some P2 billion in promissory notes held by UII, saying that it was allowed under the law.

Urban Bank officials said their problems stemmed from the panic withdrawals made by its big account holders who were mostly Filipino-Chinese, whose deposits accounted for over a fourth of its total P8-billion deposits.

But they denied that their troubles were caused by its high real estate loans, comprising over one-half of its total loan portfolio, and loans that had gone sour technically called non-performing loans (NPLs). In fact, they said the bank remained solvent despite these problems.

The BSP, on the other hand, uncovered some DOSRI (directors, officers, stockholders and related interests) law violations against bank officials.

The BSP reported as early as 2000 that Bartolome and Borlongan, among others, had allegedly exceeded the 15 percent prescribed DOSRI limit imposed by the BSP.

Under the BSP rules, a bank is prohibited from issuing DOSRI loans more than its capital funds or beyond 15 percent of its total loan portfolio, whichever is higher.

Sources said these DOSRI loans might have aggravated the liquidity problem being faced by Urban Bank that had started when it announced its plan to convert into a thift bank. The announcement led to enormous withdrawals of depositors or bank run that eventually resulted to closure of the bank. – Des Ferriols