How It Is Close?

Banco Filipino

Overview:

* 1964, Banco Filipino was established. * 1965, Banco Filipino set out to leave its mark as an innovator, by conceiving the first all-woman bank branch. * 1969, Banco Filipino Became the first bank to process online transactions in real time, giving customers the ability to deposit in any online Banco Filipino branch. * 1966 to1985, Banco Filipino was the largest savings bank in the Philippines. * In 1970, Banco Filipino started expanding into the countryside with its first provincial branch opening in Naga City. * 1972, the bank's customer base grew to one million customers, even in the midst of martial law. * 1975 It was voted the most preferred bank in Metro Manila . * For most of the 1980s, Banco Filipino would remain closed, * January 25, 1985, even though Banco Filipino was performing well and was seen by most people as a very healthy bank, the Bangko Sentral ng Pilipinas ordered its closure over alleged insolvency. * 1991 ruling made by the Supreme Court declared the bank's closure illegal. Banco Filipino subsequently reopened, albeit only with fifteen of its original 92 branches. * For much of the remaining 1990s, Banco Filipino would be busy trying to reestablish itself. * 1995 It became a member of BancNet after launching the BF Cash Card and issued its first credit card, a VISA card. * 1997 Two years later, BF shares were re-listed on the Philippine Stock Exchange, * 1999 the Supreme Court declared that Banco Filipino is entitled to damages payments caused by its illegal closure. * 2009, the Makati RTC ordered the Bangko Sentral and the Monetary Board to immediately implement the bank’s approved business plan by releasing P25 in billion financial assistance and a package of regulatory relief, which was affirmed by the appellate court in 2008. * March 17, 2011 The Bangko Sentral ng Pilipinas (BSP) ordered the closure of Banco Filipino Savings and Mortgage Bank and placed it under the receivership of state-run Philippine Deposit Insurance Corp. (PDIC), saying its liabilities topped its assets by P8.4 billion.

Analysis of the case

Problem areas:

* The officers of Banco Filipino mismanaged money entrusted to them by their depositors by its continued lavish spending. * Banco Filipino allowed loans to remain unpaid, including billions in overdue loans granted to its stockholders, officers, and related companies * To raise funds, Banco Filipino lured depositors with interest rates way above the prevailing market rates which made their interest expense higher than its income. * Banco filipino’s loans became overdue which means their principal and interest remained unpaid.

Recommendations or Proposed Solutions:

* The board of directors should have their internal control tighter especially in spending expenses. They should have established good system regarding cost spending, for instance they could have develop a group that would review if the money is properly allocated. * The company should have set up policies that concerns granting loans to its stockholders, officers and related companies. They also should have a department or committee that would review the position of loans, if it is becoming overdue. * The bank should have reviewed the way that they raise their fund and search for a better strategy. Luring depositors by giving high interest rates was a huge mistake. It is one of the major mistakes that the bank had made. It made the interest expense higher than the proceeds that they are accumulating. * Banco Filipino should have created a better control or system in paying their loans and interest to the Banko Sentral ng Pilipinas and other creditors. They should have also set up a team who would oversee the progress of their borrowings that could have prevented the interest and principal unpaid.

Banco Filipino:
Case Analysis

By: Montiel, Karen Patricia T.
AC09404