Urban Bank also known by its initials (and ticker symbol

Ticker symbol

A stock symbol or ticker symbol is a short abbreviation used to uniquely identify publicly traded shares of a particular stock on a particular stock market. A stock symbol may consist of letters, numbers or a combination of both. "Ticker symbol" refers to the symbols that were printed on the ticker...

) UBI, was a middle size bank

Bank

A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...

 in the Philippines

Philippines

The Philippines , officially known as the Republic of the Philippines , is a country in Southeast Asia in the western Pacific Ocean. To its north across the Luzon Strait lies Taiwan. West across the South China Sea sits Vietnam...

. The bank, along with its two subsidiaries, declared a voluntary bank holiday for failing to meet withdrawals and was consequently closed by the Bangko Sentral ng Pilipinas

Bangko Sentral ng Pilipinas

The Bangko Sentral ng Pilipinas and commonly abbreviated as BSP is the central bank of the Philippines. It was rechartered on July 3, 1993, pursuant to the provision of the 1987 Philippine Constitution and the New Central Bank Act of 1993...

 and put under the mandatory receivership of the Philippine Deposit Insurance Corporation

Philippine Deposit Insurance Corporation

The Philippine Deposit Insurance Corporation is a government-run Philippine deposit insurance fund. It was established on June 22, 1963 by Republic Act 3591. It guarantees deposits up to P500,000.-External links:*...

 on April 26, 2000. The bank subsequently merged with Export and Industry Bank

Export and Industry Bank

Export and Industry Bank , also known as Exportbank, is a commercial bank in the Philippines. It acquired Urban Bank in 2001 after the former collapsed due to its closure by the Bangko Sentral ng Pilipinas.-Subsidiaries and affiliates:...

 (Exportbank) in 2001.

History

Urban Bank was incorporated on July 8, 1980 as a private development bank

Development bank

The phrase development bank may refer to:* Community development banks fund low-income areas in the United States* Multilateral Development Bank provide financing for international development...

. Sometime later that year, the bank opened as a one-branch thrift bank in what is today Pasig.

In 1981, Urban Bank was chosen by the government as one of twelve financial institutions legally permitted to trade government securities. By 1982, the bank became one of the few non-commercial banks licensed by the Bangko Sentral to accept checking accounts and accept foreign currency deposits and was also accredited by the Bureau of Internal Revenue

Bureau of Internal Revenue (Philippines)

The Bureau of Internal Revenue is an attached agency of Department of Finance. BIR collects more than one-half of the total revenues of the government.-Functions:...

 as one of its tax collecting agents. After the BIR withdrew the authority to collect taxes from all collecting banks, Urban Bank was the first bank to be subsequently re-accredited by the BIR. By 1985, it became the largest originating bank for loans to the Pag-IBIG Fund for its National Shelter Program.

In 1987, Urban Bank became the first non-commercial bank to list on the Manila Stock Exchange and the Makati Stock Exchange (now the Philippine Stock Exchange

Philippine Stock Exchange

The Philippine Stock Exchange is the national stock exchange of the Philippines. It is one of the oldest stock exchanges in Southeast Asia, having been in continuous operation since its inception in 1927...

) under the ticker symbol UBI. After its closure and subsequent merger with Export and Industry Bank, Urban Bank shares were re-listed on the PSE under Exportbank's ticker symbol, EIB.

Through its affiliate, Urbancorp Investments (UII), Urban Bank acquired in 1987 a stockbrokerage seat in the MkSE. The stockbrokerage license was subsequently transferred to Urbancorp Securities, a new subsidiary licensed to engage in securities dealership and brokerage.

In 1988, the Securities and Exchange Commission

Securities and Exchange Commission (Philippines)

The Philippine Securities and Exchange Commission is a Philippine state commission responsible for securities laws and regulating the securities industry. The SEC is an agency within the Philippine Department of Finance....

 with the Bangko Sentral granted UII the license to operate as an investment house. In 1992, the Bangko Sentral granted UII the license to engage in the trust and funds management businesses.

In 1990, Urban Bank started its online computerization program and became the first non-commercial bank and the fifth bank to join the MegaLink

MegaLink

MegaLink is an interbank network connecting the ATM networks of nineteen* members in the Philippines with a total of more than 2,921* ATMs nationwide and handling more than 795,000* transactions a day...

 ATM consortium. A year later, the bank was granted a license to operate as a commercial bank

Commercial bank

After the implementation of the Glass–Steagall Act, the U.S. Congress required that banks engage only in banking activities, whereas investment banks were limited to capital market activities. As the two no longer have to be under separate ownership under U.S...

, and later in 1994, UBI became a universal bank

Universal bank

A universal bank participates in many kinds of banking activities and is both a commercial bank and an investment bank.The concept is most relevant in the United Kingdom and the United States, where historically there was a distinction drawn between pure investment banks and commercial banks. In...

, only to revert back to a commercial bank in 1997.

Other than becoming a universal bank in 1994, Urban Bank was also granted a licence to engage in quasi-bank operations as well. It was also in 1994 that Urban Bank was named Asia's best performing small bank by Thomson BankWatch. One of its subsidiaries, Urbancorp Realty Developers (URDI), listed on the PSE in 1996.

In 1995, Urban Bank launched its Virtual Banking Development Project, and by 1996, became the first Philippine bank to offer online banking

Online banking

Online banking allows customers to conduct financial transactions on a secure website operated by their retail or virtual bank, credit union or building society.-Features:...

. The Virtual Banking project was ISO 9001-certified from 1996 until the bank's closure in 2000 to meet international quality standards, making Urban Bank the first and only Philippine bank to earn this distinction. The objective of the project was to integrate banking services into an electronic platform to avoid the need for a large branch network. Later that year, Urban Bank launched a successful stock rights and public offer of its common shares, raising some 695 million pesos

Philippine peso

The peso is the currency of the Philippines. It is subdivided into 100 centavos . Before 1967, the language used on the banknotes and coins was English and so "peso" was the name used...

 in fresh capital for the bank.

In 1997, Urban Bank incorporated a subsidiary, Urbancorp Development Bank (UDB), a thrift bank based in Cebu City

Cebu City

The City of Cebu is the capital city of Cebu and is the second largest city in the Philippines, the second most significant metropolitan centre in the Philippines and known as the oldest settlement established by the Spaniards in the country.The city is located on the eastern shore of Cebu and was...

. By 1998, owing to Urban Bank's solvency

Solvency

Solvency, in finance or business, is the degree to which the current assets of an individual or entity exceed the current liabilities of that individual or entity. Solvency can also be described as the ability of a corporation to meet its long-term fixed expenses and to accomplish long-term...

 and stability, the Bangko Sentral cited UBI for its overall performance in solvency, liquidity, and management. The BSP's SLIP ratings system (which measures a bank's condition against the entire universal banking system) gave Urban Bank a score higher than the industry average, putting Urban Bank in a financial position better than most universal banks. At the time, Urban Bank was known for being one of the most solvent banks in the Philippines.

Later that year, Urban Bank embarked on a comprehensive mortgage

Mortgage loan

A mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan...

 banking program to promote housing sector activity and growth. The plan was implemented to meet the needs of the Philippine mortgage market: from developmental financing, to developer receivables financing, to buyer take-out, and to eventual securitization that would be publicly-listed. The bank vertically integrated itself with the investment house (Urbancorp Investments) and subsidiaries which would play vital roles in the program, which included insurance subsidiary Urbancorp Life and General Insurance and the Philippine Home Development Finance Corporation, a subsidiary formed to take care of home financing.

In February 2000, Urban Bank nearly concluded a merger with a smaller rival, Panasia Bank, only to fail after the BSP set new requirements on bank mergers. Due to this, Urban Bank set on a new strategy: to convert the bank into a public holding company. Even while becoming a holding company, Urban Bank would retain its three subsidiaries: UDB, URDI and UII. The holding company would then immediately infuse an additional equity of 1-2 billion pesos into the existing P50 million equity of UDB, thereby increasing its capital by 20-40 times, making it one of the biggest thrift banks in the country. Urban Bank's assets excluding its non-performing loan

Non-performing loan

A Non-performing loan is a loan that is in default or close to being in default. Many loans become non-performing after being in default for 3 months, but this can depend on the contract terms....

s would then be transferred to UDB. The proposal was presented to the Bangko Sentral on March 9, 2000.

On April 25, 2000, Urban Bank declared a bank holiday

Bank Holiday

A bank holiday is a public holiday in the United Kingdom or a colloquialism for public holiday in Ireland. There is no automatic right to time off on these days, although the majority of the population is granted time off work or extra pay for working on these days, depending on their contract...

 to put a stop to the panic withdrawals that have been plaguing essentially the investment house, reaching up to 1-2 billion pesos on that day alone. Both Urban Bank and Urbancorp Investments suffered the run due to a jittery financial market at the hands of negative news that Urban Bank denies.

In the five weeks leading up the bank holiday, Urban Bank remained amazingly solvent. In those five weeks, Urban Bank and Urbancorp Investments were able to make good on three billion pesos worth of withdrawals without any assistance from the BSP or the Philippine Deposit Insurance Corporation

Philippine Deposit Insurance Corporation

The Philippine Deposit Insurance Corporation is a government-run Philippine deposit insurance fund. It was established on June 22, 1963 by Republic Act 3591. It guarantees deposits up to P500,000.-External links:*...

 (PDIC), a feat that would be impossible for a financial institution of a comparable size. Even when the bank closed, Urban Bank claimed it had two billion pesos and Urbancorp Investments had 355 million pesos in liquid and non-risk assets.

Less than twenty-four hours after the declaration of a voluntary bank holiday, and as a legal consequence of this, the BSP's Monetary Board ordered the summary closure of Urban Bank and Urbancorp Development Bank and the virtual closure of Urbancorp Investments. The PDIC, as a mandatory receiver of closed banks served upon UBI the closure order right after the Monetary Board met to deliberate on the voluntary bank holiday declared by Urban Bank citing the resolution number therein. The board decided based on previous meetings with the senior officers of the bank and the failed attempt to secure a "white knight" and in light of three supervision and examination sector (SES) reports submitted to it by the Bangko Sentral. Urban Bank claims that the three SES reports submitted were false. Eventually the Supreme Court dismissed all the cases filed by the officers of Urban Bank and found the closure in order.

However, the fight to keep the bank open ultimately failed as the existing shareholders could not put up the minimum capital required to continue the bank. Urban Bank and Urbancorp Development Bank were ordered closed under Section 30(a) of Republic Act

Republic Acts of the Philippines

This article contains a partial list of Philippine laws. Philippine laws have had various nomenclature designations at different periods in the history of the Philippines, as shown in the following table:...

 No. 7653, the New Central Bank Act. In the 52-year history of the Bangko Sentral (under both the old and New Central Bank Acts), Urban Bank and Urbancorp Development Bank were the only banks, according to Urban Bank, ever ordered closed for reasons of illiquidity. UBI remains one of the largest, if not the largest, bank in Philippine banking history to have been ordered closed. However, UBI asserts that the BSP "even risked perjury before the Ombudsman

Philippine Ombudsman

The Ombudsman of the Philippines is an ombudsman responsible for investigating and prosecuting Philippine government officials accused of crimes....

 to conceal this fact", that it was one of the biggest, if not the biggest, banks ever ordered closed for mere illiquidity and that, according to Urban Bank, was a very stable bank with a very good (or excellent) track record.

Urban Bank and Urbancorp Investments eventually merged with Export and Industry Bank

Export and Industry Bank

Export and Industry Bank , also known as Exportbank, is a commercial bank in the Philippines. It acquired Urban Bank in 2001 after the former collapsed due to its closure by the Bangko Sentral ng Pilipinas.-Subsidiaries and affiliates:...

 (Exportbank) in September 2001 with Exportbank as the surviving entity.

Subsidiaries and affiliates

Urban Bank was divided into the following subsidiaries and affiliates:

• Philippine Home Development Finance Corporation
• Urbancorp Development Bank
• Urbancorp Insurance Brokers
• Urbancorp Investments
• Urbancorp Life and General Insurance
• Urbancorp Realty Developers
• Urbancorp Securities
• Urbancorp Technologies
• Urbancorp Travel Services
• Urban Finance and Leasing Corporation

The charges

While Urban Bank was closed on the basis of illiquidity, its officers were accused of having a hand in the closure, through accusations from the BSP and the PDIC against thirteen Urban Bank officers and employees, including Teodoro Borlongan

Teodoro Borlongan

Teodoro C. Borlongan was the last president of the Urban Bank and was unofficially known as one of the leading bankers in the Philippines....

. With the BSP and the PDIC acting as complainants, they filed a total of five criminal complaints before the Philippine Department of Justice

Department of Justice (Philippines)

The Department of Justice , abbreviated as DOJ, is the executive department of the Philippine government responsible for upholding the rule of law in the Philippines...

, from June 26 until November 15, 2000. Four of the complaints were for alleged estafa while two were related to economic sabotage. All charges were filed after the closure of Urban Bank.

For more information on many of the cases filed by Borlongan, see: NSP.gov.ph

Investigation Slip No. 1217

Investigation Slip No. 1217 was filed by the Bangko Sentral

Bangko Sentral ng Pilipinas

The Bangko Sentral ng Pilipinas and commonly abbreviated as BSP is the central bank of the Philippines. It was rechartered on July 3, 1993, pursuant to the provision of the 1987 Philippine Constitution and the New Central Bank Act of 1993...

 and the PDIC against Francisco Eizmendi, former president of San Miguel Corporation

San Miguel Corporation

Established in 1890 as a brewery, San Miguel Corporation is Southeast Asia's largest publicly listed food, beverage and packaging company with over 17,000 employees in over 100 major facilities throughout the Asia-Pacific....

 and a director of Urban Bank, for alleged estafa surrounding the partial pretermination of a five million-peso

Philippine peso

The peso is the currency of the Philippines. It is subdivided into 100 centavos . Before 1967, the language used on the banknotes and coins was English and so "peso" was the name used...

 deposit he made with UBI.

The I.S. was first filed as Criminal Case No. 01-081 at the Makati City Regional Trial Court Branch 133 on June 26, 2000, then refiled as Criminal Case No. 02-2704 at Makati City RTC Branch 64, only to be re-ordered back to Branch 133. The case was eventually reassigned to Makati City RTC Branch 149. The case, heard by Judge Napoleon Inoturan, was refiled in 2002 and eventually heard by Judge Delia Panganiban.

Judge Inoturan decided the case in favor of defendant Eizmendi and chided the DOJ for filing the case, especially because Inoturan found that not one of the four required elements of estafa was alleged or found in the crime. It also deemed Eizmendi in "good faith". The prosecution did not challenge the verdict. Instead, on October 3, 2002, the case was refiled before Judge Panganiban, with the BSP and the PDIC insisting that it was "an entirely different case". However, Panganiban ruled that the case was refiled and that it came from the previous case that was filed before her. All that the BSP and the PDIC did was drop the name of Eizmendi and in turn substitute Urban Bank, the Bangko Sentral and the PDIC as the parties "damaged and prejudiced".

Incidentally, though, the five-million pesos deposited by Eizmendi were deposited in an account with Bank of Commerce

Bank of Commerce

Bank of Commerce, also known as BankCom, Bancommerce and BoC, is a commercial bank and the 15th largest lender by asset in the Philippines. Its headquarters is at the San Miguel Properties Center, No. 7 Saint Francis Avenue, Mandaluyong...

 under the name of Borlongan in trust for Eizmendi on July 11, 2000. It was deposited there after the supposed awarding of the assets of Urban Bank to Bank of Commerce and after the PDIC refused to accept the funds from Borlongan on May 17, 2000 despite its obligation as the receiver of UBI.

Urban Bank claims that the reason why the PDIC refused the funds was obvious: they would eventually file this and more cases against UBI officers. However, when Eizmendi requested his funds from Bank of Commerce in February 2002, the bank alleges that the Bangko Sentral intimidated Eizmendi to turn over his personal fund to Exportbank, the successor of Urban Bank. But, in a letter written by Eizmendi's lawyer on June 25, 2002, he alleges that the Bangko Sentral is demanding that he turn over his funds to Exportbank, as shown in the following excerpt:

Mr. Eizmendi, however, is being bothered by letters from Atty. Manuel M. Lazaro, who represents Bangko Sentral ng Pilipinas, and who has demanded that Mr. Eizmendi turn-over the amount of P5 million to EIB.

Investigation Slip No. 1436

Investigation Slip no. 1436 was filed by the Bangko Sentral and the PDIC against Lilibeth Fajardo, former Vice President of Finance at San Miguel Corporation and a member of the Urban Bank board. The case is similar to the one highlighted on Investigation Slip No. 1217, which is alleged estafa surrounding a one-million peso bank account with Urban Bank that was partially preterminated.

The case was filed as Criminal Case No. 01-2531 on July 31, 2000 at Makati City RTC Branch 147 on July 31, 2000. This case was heard by Judge Ma. Cristina Cornejo.

It was believed that Fajardo asked her associate to ask defendant Borlongan to preterminate her deposit with Urban Bank. However, she refused to accept the one-million peso partial withdrawal when the transaction was completed. Eventually, Borlongan deposited these funds with Bank of Commerce in his name in trust for Fajardo on July 11, 2000, some three weeks before this complaint was filed.

No verdict was issued, but a year later, on September 20, 2002, the prosecution inexplicably filed before the court a Motion to Admit Amended Information, which was not released. This was done after the court rejected Borlongan's Motion to Quash the Information. Two years later, on October 18, 2004, Borlongan filed before the Court of Appeals a petition after the judge presiding over that trial admitted the amended information and questionably denied his motion for a preliminary investigation into the charges.

Investigation Slip No. 1512

The Bangko Sentral and the PDIC accused Urban Bank officials of estafa related to economic sabotage in Investigation Slip No. 1512, a crime punishable under Presidential Decree No. 1689, a Marcos-era decree punishing estafa committed "by syndicates on rural banks, cooperatives, samahang nayons, farmers' associations and other institutions" with life imprisonment to death.

This case was filed as Criminal Case No. 00-2217 on September 11, 2000 at the Makati City RTC Branch 56. The case was heard by Judge Nemesio Felix, who eventually heard a similar case a month later.

This case at first was originally stipulated by the Department of Justice as non-bailable economic sabotage, but was later "modified" to bailable economic sabotage against all ten of the accused under P.D. 1689.

However, Urban Bank argues that the following evidence disprove the said charge and the similar charge below:

1. Regulations of the Bangko Sentral that actually authorize such purchases
2. A previous BSP examination which showed that it examined and allowed Urban Bank to purchase the loans of UII
3. Minutes of board meetings held by Urban Bank executives approving the subject loans
4. A favorable credit rating
   Credit rating
   A credit rating evaluates the credit worthiness of an issuer of specific types of debt, specifically, debt issued by a business enterprise such as a corporation or a government. It is an evaluation made by a credit rating agency of the debt issuers likelihood of default. Credit ratings are...
   
    issued upon the two subject borrowers by the Credit Information Bureau as of end-1999, and
5. The preliminary examination report issued by the Bangko Sentral on February 14, 2000, which rated almost all of the subject loans as acceptable risks (either as "unclassified" or "specially mentioned"), with a few as "substandard" and none as "doubtful" or "loss".

It is because of that evidence that Urban Bank argued that it was baseless for the BSP and the PDIC to label the subject loans as "garbage" and "trash" when it gave favorable ratings towards those loans two months before the closure of the bank. They said that for the past six years, ever since Urban Bank was granted its quasi-bank license in 1994, the Bangko Sentral has always examined the loan purchases Urban Bank has made, allowing it to transfer loans from UII under the BSP's own rules and regulations.

No verdict was issued but Urban Bank claims that the forgoing case exposes the malice of the BSP and the PDIC in filing these charges.

Investigation Slip No. 1708

In Investigation Slip No. 1708, the Bangko Sentral and the PDIC accused Urban Bank of estafa related to an accused illegal purchase of "trash" loan

Loan

A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower....

s amounting to some 1.8 billion pesos on both April 24 and April 25, 2000.

This case was filed as Criminal Complaint Nos. 01-406 and 407 at the Makati City RTC Branch 56 on October 26, 2000. The cases were heard by Judge Nemesio Felix, the same judge that heard the case involving Investigation Slip No. 1512.

The case bears resemblance to the previous case just filed a month earlier (I.S. No. 1512). According to defendant Borlongan, Urban Bank acted within the bounds of law and BSP rules to buy the loans from its subsidiary, Urbancorp Investments (UII), as the only other alternative due to the refusal of the BSP to provide timely and sufficient assistance to stem the panic withdrawals that Urban Bank accuses were caused by the BSP.

Judge Felix ruled the case in favor of Urban Bank after it had been discovered that all funds of UBI and UII, including their trust departments, were accounted for. It was also stated that the loans were genuine, purchased lawfully, secured by adequate collateral and were covered by more than sufficient loan loss-reserves as required by the Bangko Sentral in examinations conducted in 1999 and 2000.

Investigation Slip No. 1828

The Bangko Sentral in Investigation Slip No. 1828 accused Urban Bank of violating Section 23 of Republic Act

Republic Acts of the Philippines

This article contains a partial list of Philippine laws. Philippine laws have had various nomenclature designations at different periods in the history of the Philippines, as shown in the following table:...

 No. 337, the General Banking Act, and Monetary Board Resolution No. 628. This case was filed as Criminal Complaint Nos. 01-1915, 1916 and 1917 at the Makati City RTC Branch 146 and were all heard by Judge Cesar Santamaria.

Violation of the General Banking Act

Investigation Slip No. 1828 accused Urban Bank of violating Section 23 of Republic Act

Republic Acts of the Philippines

This article contains a partial list of Philippine laws. Philippine laws have had various nomenclature designations at different periods in the history of the Philippines, as shown in the following table:...

 No. 337, the General Banking Act, in relation to Section X303 of the BSP Manual of Regulations for Banks. The section talks about loan limits to a single borrower, which are usually administrative in nature.

There is no historical precedent to this: the Bangko Sentral has never filed any criminal charges against banks that have violated that portion of the law. The usual punishment was a reprimand against the executives, but if done subsequently, more severe punishments, such as daily fines until the problem is resolved, are considered. However, Urban Bank accuses the BSP of jumping right into filing this case before giving it any sort of warning.

This case was decided in favor of the prosecution, but an appeal was filed by defendant Borlongan. A temporary restraining order

Restraining order

A restraining order or order of protection is a form of legal injunction that requires a party to do, or to refrain from doing, certain acts. A party that refuses to comply with an order faces criminal or civil penalties and may have to pay damages or accept sanctions...

 had been issued by the Court of Appeals against the court deciding in the case from arraigning the accused.

Violation of Resolution No. 628

The BSP in Investigation Slip No. 1828 also accused Urban Bank of violating BSP Monetary Board Resolution No. 628, which is clearly administrative in nature. It talks about limits on loan exposure to real estate loans, which the Bangko Sentral claims Urban Bank failed to follow. Although the resolution exists, the resolution was never printed in the Official Gazette or in a newspaper of general circulation as required by law, as accused by defendant Borlongan.

The oddity in this case was that this case was filed in the last three days before Urban Bank declared a bank holiday, as they believed this was filed due to their accusation that the Bangko Sentral did not provide them sufficient financial assistance to curb the panic withdrawals.

Supreme Court final ruling to proceed with P 4.5 billion estafa case against 4 officers

On April 18, 2008, the Supreme Court of the Philippines

Supreme Court of the Philippines

The Supreme Court of the Philippines is the Philippines' highest judicial court, as well as the court of last resort. The court consists of 14 Associate Justices and 1 Chief Justice...

 2nd Division affirmed the appellate court’s judgment to proceed with the PHP 4.5 Billion (USD 109 Million) estafa case against the officers of Urban Bank, namely, Nida S. Santos, Milagros Santiago, Rowena Punzalan, Chulla Formanes, Loida O. Payonga and Amalia Ordas.

On other cases filed... The BSP Media Section reported on 06.08.2004:

(See http://www.bsp.gov.ph/publications/media.asp?id=328&yr=2004)

"The Court of Appeals has dismissed the administrative complaint filed against BSP Governor Rafael B. Buenaventura and five other BSP officials regarding Urban Bank’s receivership, thereby setting aside its earlier order to suspend the Governor and other BSP officers.

In an Amended Decision penned by Associate Justice Lucas P. Bersamin and promulgated on June 4, 2004 by the Court of Appeals, the CA Special Division of Five also unanimously rejected the motion for reconsideration of complainant Teodoro Borlongan, former Urban Bank President, seeking the dismissal of the BSP officials. Under CA rules, when there is disagreement in a division, the case goes to an expanded division of five. The Fifth Division included Associate Justices Bersamin, Eugenio S. Labitoria, and Elvi John S. Asuncion; Associate Justices Salvador J. Valdez, Jr., and Rebecca de Guia-Salvador completed the expanded Division.

The Associate Justices were unanimous in clearing BSP Governor Buenaventura of the charges alleged by Mr. Borlongan. Except for the dissenting vote of Associate Justice Labitoria, all the other Associate Justices similarly exonerated or cleared BSP officials Alberto V. Reyes (Deputy Governor), Dolores B. Yuvienco (Managing Director), Candon B. Guerrero (Director) and Tomas Aure (former Director).

BSP Governor Buenaventura hailed the Amended Decision of the Court of Appeals clearing the BSP officials of the charges related to Urban Bank’s receivership. He said the Court of Appeals decision “should strengthen the resolve of others in government to continue to do their work with vigilance and courage, and to keep faith in the justice system.”

The Governor declared: “We at the Bangko Sentral ng Pilipinas have always believed that the courts will rule in our favor. We are professionals and we stand by the integrity of our actions and intentions.”

BSP’s timely decision to place Urban Bank under receivership protected the depositors and the general public. It also facilitated the take over and assumption by Export and Industry Bank (EIB) of Urban Bank’s assets and liabilities, which allowed EIB’s repayment of assumed liabilities including deposits.

In the Amended Decision, the Court of Appeals ruled that the dismissal of the administrative charges against the BSP Governor and the BSP General Counsel by the Ombudsman is final and unappealable, following the Rules of Procedure of the Office of the Ombudsman.

The Amended Decision also held that:

1. Borlongan has no standing to sue considering that the owners of the majority stock of Urban Bank themselves decided against challenging the Monetary Board (MB) resolutions, a fact attested to by Arsenio M. Bartolome III, Urban Bank Chairman, in his affidavit of Dec.15, 2002. Mr. Bartolome also said the MB action was “in the first place not unexpected.” Urban Bank’s own top management had continually provided the BSP the picture of the worsening situation of the Bank in the four weeks leading to its unilateral declaration of the bank holiday on April 25, 2000;
2. The receivership of Urban Bank has firm legal basis under the BSP Charter;
3. The recommendations for said receivership by Reyes, Yuvienco, Guerrero and Aure were based on adequate and constant monitoring and examination of Urban Bank’s records over a period of time; and
4. Borlongan’s citation of the Banco Filipino Supreme Court ruling is misplaced since the latter was based on the old Central Bank Act (R.A. No. 265, as amended) whereas the basis for the receivership of Urban Bank is the new BSP Charter (R.A. No. 7653).

This case arose after the Monetary Board placed Urban Bank under receivership following the unilateral declaration of a bank holiday by Urban Bank on April 25, 2000. Upon the takeover of Urban Bank by the Philippine Deposit Insurance Corporation (PDIC) as receiver, serious irregularities in said bank were uncovered consisting of the massive transfer of deposit funds from said bank to its affiliate, the Urbancorp Investments Inc.(UII). In particular, deposit funds totaling P4.60 billion from Urban Bank were exchanged for doubtful receivables from UII just before the declaration of a bank holiday, thereby causing the bank’s illiquid position.

Government supervisors also uncovered unauthorized pre-termination of money market placements of certain investors and violations of bank regulations on single borrower’s limit and the limit on real estate exposure. With these findings, the Department of Justice filed four (4) cases for estafa and three (3) criminal cases for violations of bank regulations against Mr. Borlongan. These cases are being pursued in the Makati Regional Trial Court by DOJ prosecutors and by lawyers from both BSP and PDIC.

In the meantime, Mr. Borlongan filed criminal and administrative complaints in the Ombudsman against the BSP Governor and other officers of the BSP. The Ombudsman has since dismissed the criminal charges and this dismissal was affirmed by the Supreme Court with finality in its two (2) Resolutions dated Oct. 13, 2003 and Nov. 24, 2003. The Ombudsman also dismissed the administrative charges against the BSP Governor and the BSP General Counsel Juan de Zuñiga, Jr., but held that the other BSP officials are liable for simple neglect of duty for which their suspension for one month and one day was ordered.

From this Ombudsman decision, Reyes et al. appealed to the CA and their case was assigned to the 17th Division, chaired by Associate Justice Mario L. Guarina III. Mr. Borlongan also appealed the Ombudsman decision to seek the dismissal of the BSP officials; his case was assigned to the 5th Division of the CA chaired by Associate Justice Labitoria, which proceeded to resolve the case and denied the motion for the consolidation of the case with the earlier filed case with the 17th Division. In the contested resolution of the 5th Division issued on Aug.13, 2003, the suspension for one year of Gov. Buenaventura and BSP officials Reyes, Yuvienco, Guerrero and Aure was ordered for “alleged gross neglect of duty.”

In a contrasting decision, the 17th Division on Sept. 18, 2003 found no basis for the administrative charges against the BSP officials and dismissed the same. The decision, penned by Associate Justice Mario Guarina III and concurred in by Associate Justices Martin S. Villarama,Jr. and Jose C. Reyes, Jr. said: “ Urban Bank’s Borlongan has taken extraordinary effort to expose, malign and destroy the SES (BSP’s Supervision and Examination Sector) reports. His tirades fail to convince us……At a time when indecision and hesitation have become the order of the day in our society and government, the decisiveness shown by the petitioners in this case shows that our people have not yet lost the political will to enforce the law and protect the public interest beyond personal ties or convenience. Many more acts of silent heroism among our civil servants might be needed before we can finally rise Gunmar Myrdal’s lasting criticism of the soft state.”

Acting on the motion for reconsideration of Mr. Borlongan, the 17th Division affirmed the dismissal of the charges. The decision of the 17th Division has been appealed by Mr. Borlongan to the Supreme Court where it is pending.

Comparison to Banco Filipino

While Urban Bank and its senior officers continue to maintain...
"In the Urban Bank case, Urban Bank president Borlongan compared the case of Urban Bank to that of Banco Filipino

Banco Filipino

Banco Filipino Savings and Mortgage Bank , or simply Banco Filipino, is a bank in the Philippines. It is also known for property developments such as BF Homes, subdivisions in Parañaque, Quezon City and Las Piñas...

, which was closed for the same reasons."

In actuality: "Borlongan’s citation of the Banco Filipino Supreme Court ruling is misplaced since the latter was based on the old Central Bank Act (R.A. No. 265, as amended) whereas the basis for the receivership of Urban Bank is the new BSP Charter (R.A. No. 7653)."

So, the following comparison of the cases is not relevant when Urban Bank alleged that its treatment in its closure case was worse than that of Banco Filipino. The cases were compared on the following points:

Banco Filipino	Urban Bank
Banco Filipino is a savings bank.	Urban Bank is a commercial bank with two subsidiaries.
Banco Filipino was suffering from illiquidity and was granted a 119.7 million-peso loan from the Bangko Sentral.	Urban Bank alleged that numerous negative media reports attributed to the Bangko Sentral caused its illiquidity and that it received no help from the Bangko Sentral in resolving its illiquidity.
Banco Filipino declared a self-imposed bank holiday on July 23, 1984 due to its illiquidity.	Borlongan and Urban Bank chairman Arsemio Bartolome III pre-cleared a bank holiday with the Bangko Sentral set for April 25, 2000.
Banco Filipino was not ordered closed during its bank holiday. It was put under conservatorship Conservatorship Conservatorship is a legal concept in the United States of America, where an entity or organization is subjected to the legal control of an external entity or organization, known as a conservator. Conservatorship is established either by court order or via a statutory or regulatory authority...  by the Bangko Sentral a week after its bank holiday was declared and was even given a three billion-peso credit line.	Despite provisions in Philippine banking law that deal with illiquid banks, Urban Bank was not placed under conservatorship. Instead, it was ordered closed less than 24 hours after the declaration of its bank holiday.
It took six months for Banco Filipino's supervision and examination sector (SES) report to be made. The SES reports were released on January 23, 1985. At the recommendation of the report, BF was ordered closed two days later.	Urban Bank's three SES reports were allegedly rushed and made "at the flick of a finger" in three hours. The reports were allegedly signed only 30 minutes before the Monetary Board meeting that would decide the fate of Urban Bank.
While the SES report recommended that Banco Filipino be closed on the basis of illiquidity and insolvency, the Supreme Court Supreme Court of the Philippines The Supreme Court of the Philippines is the Philippines' highest judicial court, as well as the court of last resort. The court consists of 14 Associate Justices and 1 Chief Justice...  found that the report was based on incomplete findings.	Urban Bank and its subsidiaries were not found to be insolvent in their SES reports. It was also alleged that not only were Urban Bank's SES reports based on false information, but even its SES reports were falsely substituted and ante-dated to give the impression that the reports existed while deliberating the fate of the bank.
The Supreme Court found that the findings of the Monetary Board in closing Banco Filipino was not only unethical, but also questioned how a bank can resolve its financial status in four days, as well as resolve the issues surrounding the information found in Banco Filipino's SES report.	Urban Bank alleged that the Bangko Sentral did not furnish them a copy of its SES reports, so it was unable to take action against the reports' findings. It alleged that its reports were given only five months after the bank was ordered closed. Urban Bank even alleged a lack of due process Due process Due process is the legal code that the state must venerate all of the legal rights that are owed to a person under the principle. Due process balances the power of the state law of the land and thus protects individual persons from it... on its behalf.
Banco Filipino requested the transcripts and records of the meetings deliberating the closure of the bank. The Bangko Sentral denied BF's request.	Subsequent amendments to Philippine banking laws require the Bangko Sentral to keep all records of all Monetary Board meetings. Urban Bank alleged that the meeting held regarding the fate of Urban Bank was not even recorded, and that no transcripts of the meeting were made.