Buenaventura has remained in his post and has announced plans to appeal the appellate court ruling last week that suspended him without pay for a year due to his decision to shutter a troubled bank three years ago.
"The Philippine American Chamber of Commerce expresses its full support for Governor Rafael Buenaventura and expresses concern over the one year suspension meted out by the Court of Appeals in connection with the closing of Urban Bank in 2000," the AmCham said in a statement.
AmCham includes many of the largest US companies and financial institutions with business interests in the Philippines, as well as Filipino companies and financial institutions with interests in the United States.
It said the Ombudsman had previously determined that the governor had "acted properly with respect to the closing of Urban Bank. In our view, the closure was made in compliance with the conventional wisdom dictating the norms of sound financial supervision and overall financial stability."
AmCham maintained that Buenaventura "has played a key role in the Philippines’ growing macroeconomic health through the (central bank’s) stabilization of interest rates and skillful management of foreign exchange reserves.
"The level of respect commanded by Governor Buenaventura among international investors is one of the essential foundations for the long term prospects of the Philippine economy," it added.
Since last week, the peso has been sliding partly in reaction to the court order suspending Buenaventura. The local currency closed at a new five-month low of P55.09 to the dollar on Monday.
As this developed, the BSP finally came out yesterday to explain how Urban Bank of the Philippines (UBP) was run to the ground by the collapse of its investment house, the UBP Investment Inc. (UII), in 2000.
BSP deputy governor Alberto Reyes said that in April 2000, UBP president Ted Borlongan came to the BSP and said the bank had made the unilateral decision to declare a bank holiday.
According to Reyes, there was no run in the bank but UBP had issued about P1 billion worth of unfunded checks that were about to bounce.
Reyes said the BSP had offered to extend an emergency loan to UBP but the bank declined because it would have required an approval from its board of directors.
"It turned out that if they had availed of the emergency loan, they would not have been able to provide any collateral to the Philippine Deposit Insurance Corporation (PDIC)," Reyes explained. "They didn’t want to tell their board of directors because that would have triggered a withdrawal of their investors."
Reyes also said that the run was in UII and not in UBP. But this meant that UBP needed funds to bail out UII and it used the money of its depositors to do this.
"They were buying bad receivable of the investment house and they were buying it at a premium," Reyes said. "They had to do that because they needed to fund the withdrawals of UII investors. In effect, UBP used the money of its depositors in order to buy the bad loans from UII."
According to Reyes, UBP bought roughly P4 billion worth of bad loans from UII and this was discovered only after the bank had already been shut down.
"We closed the bank because the BSP wanted to protect the depositors. We had to do it immediately for the safety of the bank records," Reyes stressed. "If we hadn’t closed the bank immediately, there would have been splitting of depositors, bank records would have been contaminated and would not have found out what happened," he added. — AFP, Des Ferriols