A Philippine commercial bank, together with its two subsidiaries, was arbitrarily closed by the Bangko Sentral ng Pilipinas (BSP) under Gov.Buenaventura on 26 April 2000, during President Estrada's administration.  Urban Bank, Inc. (UBI) was a publicly-listed commercial bank; Urbancorop Development Bank (UDB) was a Cebu-based thrift bank; and Urbancorp Investments, Inc. (UII) was an investment house with a trust department ...

    “BSP with PDIC illegally closed my bank, filed baseless charges to cover their tracks, used coercion upon me, my employees and directors, held hostage my depositors to protect themselves from suit, and bled my shareholders dry in order to hand-over Urban to another bank.”  (UBI President Borlongan’s letter to Pres. Macapagal-Arroyo dated 27 Mar 2001)

    “Admittedly, the closure of UBI and its subsidiary financial institutions came as a bolt out of the blue, to the public. What was more startling was the nagging question of why it was abruptly closed for business.” 
(Court of Appeals Decision in CA-GR SP No. 72270 dated 13 Aug 2003)

    “They’ve only declared the holiday today. Tomorrow, we will be coming in to take over. PDIC will be the receiver.” 
(BSP Gov. Buenaventura's TV interview, 12 hours before the Monetary Board met to deliberate on the SES reports that allegedly served as bases of the closure on 26 Apr 2000)

    “Bank management instead decided to declare a bank holiday. I was told that the primary reason was that they knew P1.3-billion was not sufficient. Governor Buenaventura gave me a call right after the bank made that decision.” 
(PDIC President Norberto Nazareno's speech before the Rotary Club of Manila on 4 May 2000)

    “Well, it was an option for them (to tap a emergency fund facility), but we came to the conclusion that at the rate things were going, it would probably prove to be insufficient, so that the better alternative course of action was to declare a holiday.”
 (BSP Gov. Buenaventura's TV interview on 26 Apr 2000)

     “First, it was a situation of illiquidity and inability to pay liabilities in the course of its business, a situation which Urban Bank unilaterally brought upon itself. In other words its closure contrary to what is commonly thought was not grounded on insolvency but on its illiquidity. And we repeat, it was not grounded on insolvency but on illiquidity.”
 (BSP Gov. Buenaventura's statement to Congressional Committee on Good Government, on 6 Dec 2000)

     “On Easter Sunday April 23rd (2000) at 5:00pm, Mr. Bartolome and I met with Gov. Buenaventura, Mr. Alindogan, and PDIC President Norberto Nazareno at the Manila Golf Club...In that meeting, Mr. Alindogan said that our liquidity assistance would only be P1.3 billion (and I don’t know how BSP arrived at that amount), broken down as follows – P500 million from PDIC to finance the trust withdrawals of UII, and P800 million from BSP to finance UBI’s deposit withdrawals. I said that the amount was not enough, but Mr. Alindogan said that if it was not enough, ‘Urban may have to declare a holiday’. I told Gov. Buenaventura, ‘Governor, should Urban declare a holiday, it will cause an industry run.’ Gov. Buenaventura replied, ‘There will be no industry run. I will just declare a holiday for these banks. So be it.’”
(Borlongan's counter-affidavit in IS No. 2000-1512, on 6 Oct 2000)

     “A bank which declares a bank holiday closes itself for business and consequently would be unable to discharge its obligations in due course.”
(BSP Gen. Counsel Zuniga's Legal Opinion dated 26 Apr 2000)


  “I believe Archit (Bartolome) and Ted (Borlongan) were ill-advised, if ever they sought legal counsel. I think both had the impression that they will still have about a month to try to fix things up. So, Archit called in disbelief that we had to inventory his room and seal off drawers, but afterwards realized the reality of the situation and accepted the fact that the Bank is now closed.” (PDIC President Norberto Nazareno's speech before the Rotary Club of Manila on 4 May 2000)

  “URBAN BANK REOPENING TARGETTED IN ONE MONTH. 'We hope to open Urban Bank, or the new institution, in 30 days,' Bangko Sentral Gov. Rafael B. Buenaventura yesterday told reporters.”
(BusinessWorld, 28 April 2000)

  “SUIT TO DELAY URBAN BANK SALE, BSP WARNS. The sale of Urban Banking Corp. will be delayed if Urban Bank officials pursue plans to file a lawsuit against the Bangko Sentral ng Pilipinas for arbitrary closure, according to BSP governor Rafael Buenaventura. 'If they want to do that, then it's going to delay the sale,' the BSP chief said.”  
(Manila Times, Malaya and Phil. Post, 12-13 May 2000)

  “They (Borlongan) are being coerced to withdraw their (Ombudsman) case…at the proper time, I will reveal such. And let me just inform the Committee that this will be another explosive issue of the opposition.”
(Rep. Michael Defensor's manifestation to Congressional Committee on Good Government, on 6 Dec 2000)

  “The Bangko Sentral shall maintain and preserve a complete record of the proceedings and deliberations of the Monetary Board, including the tapes and transcripts of the stenographic notes, either in their original form or in microfilm.” (Sec. 11 of RA 7653 New Central Bank Act)

  “The proceedings and deliberations of the MB need not be recorded through tapes and stenographic notes. It is sufficient if minutes are taken of said proceedings and deliberations...To be sure, the Minutes reviewed, approved and signed by the MB members in attendance at the meetings to which said Minutes pertain would carry more weight than mere tape recordings or stenographic notes taken by third persons. Stenographic notes, in particular, often carry inaccurate statements and errors, depending on the proficiency and ability of the stenographer.” 
(BSP Gen. Counsel Zuniga’s counter-affidavit in OMB-0-01-0089)

  “The BSP governor said the bank 'was solvent and should be opened before a short period of time.' Urban Bank, he added, was just 'experiencing a temporary liquidity crunch due to heavy withdrawals, but recent examination of their books showed that it was healthy'...For he actually named a few banks and institutions that he dubbed to be 'below par' than Urban Bank’s books showed...If the BSP could release P9 billion to I-Bank and 5 billion to PBCom–-loans required after his irresponsible statements on national TV–-why did he refuse a P3.5 billion request from an institution that, in his own words, showed better books than banks that received the dole outs?” (Rep. Michael Defensor's Privilege Speech in Congress, on 3 Oct 2000)

  “OVERALL CONCLUSION: Urban Bank, Inc. showed satisfactory financial condition as of March 31, 1999...For the last three (3) years, its operations continued to be profitable despite recent financial turmoil in the Southeast Asian region. It managed to maintain its solvency and liquidity during the period under review...Bank’s composite CAMELS rating of “3” indicated that UBI may be vulnerable to business fluctuations and other outside economic factors but failure is unlikely. Bank had substantially complied with banking laws, BSP rules and regulations...”
(SES Final Report of Examination on UBI as of 31 Mar 1999, based on examination conducted in Apr-Jun 1999 and submitted to the Monetary Board on 19 Nov 1999)

  “Meron pong provision sa batas (Sec. 28 RA 7653) na we can only examine banks once every 12 months. So, that’s why in between examinations, the banks can do some violations without us noticing this. And this can be discovered in the next examination...But we have actually proposed an amendment to the Central Bank Charter to allow us to do examinations more than once a year, as often as necessary.” 
(BSP Dep. Gov. Reyes' statement to Congressional Committee on Good Government on 6 Dec 2000, despite an unlawful examination of UBI and UII  conducted in Jan-Feb 2000 with cut-off date 30 Nov 1999)

  “Concluding the examination...A pre-closing conference led by the examiner-in-charge should be held with the officers/representatives of the institution on findings/exceptions. The minutes of the conference may be made part of the report to the Monetary Board. A copy of the summary of findings/violations should be furnished the institution examined so that corrective action may be taken by them as soon as possible.” 
(Sec. L of General Instructions of Central Bank Manual of Examination Procedures. However, the findings in the 3 SES reports on UBI, UDB and UII dated 26 April 2000 were neither furnished nor discussed with any of the institutions.)

  “Responsibility.- Members of the Monetary Board, officials, examiners, and employees of the Bangko Sentral who willfully violate this Act or who are guilty of negligence, abuses, or acts of malfeasance or misfeasance or fail to exercise extraordinary diligence in the performance of his duties shall be held liable for any loss or injury suffered by the Bangko Sentral or other banking institutions as a result of such violation, negligence, abuse, malfeasance, misfeasance or failure to exercise extraordinary diligence.”  (Sec. 16 of RA 7653 New Central Bank Act)

  “Proceedings in Receivership and Liquidation.- Whenever, upon the report of the head of the supervising or examining department, the Monetary Board finds that a bank or quasi-bank: (a) is unable to pay its liabilities as they become due in the ordinary course of business. Provided, that this shall not include inability to pay caused by extraordinary demands induced by financial panic in the banking community...in which cases, the Monetary Board may summarily and without need for prior hearing forbid the institution from doing business in the Philippines and designate the Philippine Deposit Insurance Corporation as receiver of the banking institution.”  
(Sec. 30.a of RA 7653 New Central Bank Act, under which UBI and UDB were ordered closed.)

  “Assuming that it was a debatable issue whether Urban Bank was ‘precarious’ or not, the fact remains that when it was hit by the bank run that reached critical proportions in April, 200(0), Urban Bank could not meet the cash withdrawals.”
(BSP Gov. Buenaventura’s Opposition in OMB-ADM-0-00-0867)

  “Likewise, in the case of UDB, the Memorandum (SES report) clearly shows that UDB’s inability to pay its obligations in the ordinary course of business was not due to ‘extraordinary demands induced by financial panic in the banking industry,’ but rather due to its unilateral declaration of a bank holiday.”
(BSP's Reyes, Aure, Yuvienco & Guerrero’s Motions for Reconsideration in CA-GR SP No. 72270)

  “UDB was not even illiquid...In the case of UBI, petitioner has no disagreement with respondents that UBI suffered from illiquidity, but as a result of the extraordinary demands brought on by financial panic. Respondents did not deny the fact of UBI’s extraordinary demands, nor the existence of financial panic evidenced by the facts presented in the Petition. Nor did respondents deny that no such finding was anywhere mentioned in the SES report on UBI, much less in the MB minutes and resolution that ordered UBI’s closure.  As stated in the Petition which respondents did not deny, the closure of UBI and UDB was UNPRECEDENTED in Philippine banking history:  They were the only banks to have been ordered closed on mere illiquidity (or holiday to stop a run) in the 52 years under the old and New Central Bank Acts (RA’s 265 and 7653).  Respondents Reyes and Aure, in the effort to cover-up this fact, perjured themselves repeatedly in the course of the Ombudsman’s investigation, in order to prevent their malfeasance from coming to light.
  (Borlongan's Reply dated 27 May 2004, in SC GR No. 161276)

  “We find that the Supervision and Examination Sector Report rendered by respondents Reyes, Yuvienco, Aure and Guerrero and which became the bases for the closure of UBI and UDB were haphazardly and negligently done.”  (Ombudsman’s Order in ADM-0-00-0867 dated 2 July 2002)

  “While the bank’s closure is now moot and academic as they are now undergoing rehabilitation, we cannot ignore the fact that with respondents Yuvienco’s, Reyes’, Aure’s and Guerrero’s harsh recommendation to place them under receivership at that early for being illiquid, the Monetary Board acquiesced to the same without giving the bank enough time under the law to meet the required minimum capital requirement. As frontline soldiers, it is but natural that the Monetary Board, as BSP’s policy-making body, would tend to believe that the respondents’ report and findings of facts and applicable law are real and accurate insofar as UBI and UDB are concerned.”
 (Ombudsman’s Order in ADM-0-00-0867 dated 30 July 2002)

  “This Court cannot help but notice why private respondent Buenaventura was absolved from any liability when he is the governor of BSP, the Chief Executive of the Bangko Sentral…He cannot take refuge behind the inefficiency of his subordinates...Had the respondents, headed by Governor Buenaventura, adhered to the pronouncements enunciated in the case of Banco Filipino Savings and Mortgage Bank vs. Monetary Board, Central Bank of the Philippines, et al., they would not have hastily closed these banking institutions...The closure of UBI, UDB and UII was done in an arbitrary manner violative of fair play and committed with grave abuse of discretion which was worst than what happened when the Central Bank closed Banco Filipino.” 
(Court of Appeals Decision in CA-GR SP No. 72270 dated 13 Aug 2003)

  “I do not agree...Respondents, as public officers occupying exalted positions must in accordance with the constitution and the Ethical Standards Law exemplify the ideals of integrity and efficiency in the discharge of these duties. They must ever be prudent to act always in accordance with law and not to perform or authorize legally doubtful acts that may stain the integrity of their office. Their acts of indiscriminately putting a stop to the banking business of UBI, UBD and UII in so short notice is already reflective of insufficiency and indicative of negligence for which they should be penalized. They failed to live up to the standards and ideals expected of their rank and stature. The conduct of public officials in highly sensitive positions, such as officers of the Monetary Board, is circumscribed with heavy burden of responsibility such that by the nature of their function, respondents must conduct themselves with propriety and above all else, be above suspicion.” 
(Concurring/Dissenting Opinion of chairman of CA 5th Div. in CA-GR SP No. 72270, dated 4 June 2004)








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