The Ombudsman also dismissed a related administrative case filed by Borlongan against Buenaventura and BSP general counsel Juan de Zuñiga, but three other BSP officials were held liable for "simple neglect of duty" in the aftermath of the bank’s collapse.
Found liable for administrative lapses were BSP Deputy Governor Alberto V. Reyes, Dolores Yuvienco, Candon Guerrero and Tomas Aure.
Buenaventura said he was "pleased" with the dismissal of the case, saying the decision affirmed the closure of Urban Bank.
The Office of the Ombudsman said UBI’s declaration of a bank holiday supported the "factual decreasing" in the bank’s liquidity to meet its obligations on time. This means the order of the Monetary Board to close the bank and its subsidiary, Urban Development Corp., was justified. Equally justified, according to the ruling, was the decision to put them under receivership as well as the revocation of the trust license of Urban Investments Inc. (UII).
Buenaventura said the BSP has appealed the ruling on Reyes and other BSP officials. He said the premise of "simple neglect of duty" is sufficient ground to seek a review of the decision against the officials.
Meanwhile, Borlongan and other top officials of Urban Bank and UII are facing three estafa cases filed by banking authorities.
BSP filed the case against Borlongan and UrbanBank chairman Arsenio Bartolome for allegedly using the bank’s money amounting to P4.5 billion to bail out UII investors.
The BSP reported that the bank used about P1 billion of its depositors’ money to buy UII receivables hours before it declared a holiday on April 25, 2000. 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 collaterals as required by law.
Bank officials claimed there was nothing "irregular" about the bank’s move to purchase some P2 billion in promisory notes held by UII, saying that it was allowed under the Law.
UrbanBank officials said their problems stemmed from the panic withdrawals made by its big account holders who were mostly Filipino-Chinese, whose deposits account for over a fourth of its total P8 billion deposits.