Charges vs BSP governor dismissed with finality

Criminal charges against Bangko Sentral ng Pilipinas Gov. Rafael Buenaventura and other BSP officials have been dismissed with finality, but the administrative case still awaits resolution.

The Supreme Court junked the criminal charges filed by the Urban Bank of the Philippines (UBP) against the BSP, denying an appeal that sought to hold BSP examiners and regulators criminally liable for the closure of Urban Bank in 2000.

In a two-paragraph decision handed down by the Supreme Court’s Third Division, the criminal charges were dismissed as the court found no substantial argument to warrant the reconsideration of its earlier decision.

"The decision is final" the SC decision read, shooting down any possibility of further appeal.

The latest SC issuance, however, only resolved the criminal charges against Buenaventura and four BSP examiners, who were accused of perjury, falsification of private documents and offering false evidence when the BSP ordered the closure of Urban Bank.

Buenaventura’s suspension by the Court of Appeals (CA) is still pending before the SC. UBP president Teodoro Borlongan had filed the administrative cases that led to Buenaventura’s suspension.

The original criminal complaint was filed by former UBP counsel Benjamin Tabios Jr., but it was dismissed by the Office of the Ombudsman for lack of "clear and sufficient basis."

Tabios later elevated the case to the CA, which also dismissed the petition. He then brought it to the high court.

The high tribunal dismissed the case in September, but Tabios appealed the decision, prompting the court to issue its final dismissal of the case on Oct. 8.

The SC upheld the Ombudsman’s decision in July last year that there was no probable cause to indict Buenaventura and other BSP officials.

The Ombudsman likewise dismissed the related administrative case filed against Buenaventura, but this ruling was reversed by the CA, which ordered the suspension of the respondents for one year and one day. The case is still pending resolution before the SC.

UBP accused the BSP of denying the beleaguered bank an emergency loan to enable it to survive a massive bank run in early 2000. The BSP said the bank run was not within UBP itself, but in its investment arm, UBP Investment Inc. (UII).

UBP needed funds to bail UII out after the investment house collapsed and was using the money of its depositors for this purpose.

UBP then unilaterally declared a bank holiday after issuing some P3 billion in unfunded checks that were about to bounce.

The BSP already appealed the CA decision which shook the currency market. The currency market players saw Buenaventura’s suspension as one that sent out the message that the BSP could be punished for "performing their duties and protecting the interests of depositors."

Buenaventura is the first BSP governor to ever be ordered suspended. If the SC upholds the disciplinary action of the CA, Buenaventura and his co-accused will be suspended for one year and one day.

The BSP, on the other hand, stood pat on its opinion that UBP was shut down in full accordance with the required procedure.

BSP Deputy Gov. Alberto Reyes said the CA order was completely unexpected, considering the conditions that led to UBP’s closure.

Reyes said Borlongan went to the BSP and that the bank made a unilateral decision to declare a bank holiday. Reyes said there was no bank run, but UBP had issued the unfunded checks.

"We asked them if they were sure and they said yes," Reyes said. "We explained the procedure to them and told them that we need a letter from them before we approve the bank holiday."

Reyes said the BSP had offered to extend an emergency loan to UBP, but the bank declined because it would have required the approval of the UBP 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 Corp.," he said. "They also didn’t want to tell their board of directors because that would have triggered a withdrawal of their investors."

He added that the closure of UBP was prompted by the judgment of the Monetary Board that the bank records were in danger of contamination if the bank continued operations.

"We closed the bank because the BSP wanted to protect the depositors," Reyes said. "We had to do it immediately for the safety of bank records."

UBP, he said, had been "buying bad receivables of the investment house (UII) and they were buying (them) at a premium. 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."