Liquidity problems, bad luck may have doomed Export Bank

Posted at 04/27/2012 2:58 PM | Updated as of 04/28/2012 10:13 AM

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) said Export & Industry Bank could no longer pay around P700 million to P800 million worth of immediate maturing obligations that forced them to ask to be placed under receivership.

While the law provides for emergency loans to be given to distressed banks, the BSP said it needed time to process and evaluate any application for emergency loans, while Export Bank's obligations are already immediate.

In a press briefing on Friday, BSP deputy governor Nestor Espenilla, Jr. said Export Bank could have been saved by BDO Unibank but the bigger bank allegedly found several legal issues that it did not want to be dragged into.

Espenilla said Export Bank had liquidity problems, meaning it lacked cash to cover its current obligation, rather than a simple deficiency in assets versus its liabilities.

Asked if the bank was mismanaged, Espenilla said Export Bank's troubles were likely brought about by a combination of bad luck, wrong decisions and insufficient liquidity or cash to cover obligations.

But he quickly clarified that as standard operating procedure, the government would have to further investigate the circumstances surrounding Export Bank's closure.

Export & Industry Bank was the white knight of the then troubled Urban Bank in 2001. Now, it suffered the same fate as the bank it had rescued.

Banking industry remains healthy

Espenilla assured depositors that despite Export Bank's closure, the Philippine banking industry remains healthy. Export Bank's total deposit base of P14 billion is not even half a percent of the country's total bank deposits of P7 trillion.

According to Espenilla, there is still the possibility that shareholders of Export Bank will be able to raise fresh funds or another entity would be interested in infusing investments.

The BSP advised depositors with P500,000 or less in their bank accounts to immediately coordinate with the Philippine Deposit Insurance Corp. to be able to get their deposits in full.

Those with more than P500,000 in deposits will have to wait for further developments as the bank may still be rehabilitated with fresh funds or if not, go through liquidation of assets. Proceeds from the liquidation of assets may be used to pay remaining clients and debtors of the bank.