BSP power to close banks is exclusive

ONLY the Bangko Sentral ng Pilipinas (BSP) has the authority to decide whether or not a bank should be closed.

This fact was reinforced in a recent decision issued by the Court of Appeals (CA), granting the BSP’s petition for review against an order of Davao City Regional Trial Court Judge Jaime Quitain.

Judge Quitain had issued a stay order in 2006 preventing the Philippine Deposit Insurance Corporation (PDIC), by the authority of the BSP Monetary Board, from liquidating the assets of the closed All AsiaBank Corporation Inc. (AsiaBank).

The BSP Monetary Board had ordered the closure of AsiaBank in 2002 and placed it under the receivership of the PDIC. PDIC subsequently submitted its recommendation to the Monetary Board to liquidate the AsiaBank after the bank’s principals repeatedly failed to submit a viable rehabilitation plan.

In 2006, a group of depositors filed a petition for corporate rehabilitation before the Davao City RTC Branch 10, presided by Judge Quitain.

AsiaBank had then assumed a different “identity.” The gist of the depositors’ proposal before the Davao City RTC: “Having forfeited its license to operate as a bank, AsiaBank would carry on not anymore as a banking entity, but as an ordinary corporation with a minimum capitalization of P300 million.”

When Judge Quitain issued the stay order against the bank’s liquidation, claiming that his court had acquired jurisdiction over the petition for rehabilitation, the BSP and the PDIC filed a petition for certiorari before the Court of Appeals.

“The main issue is: Whether the Regional Trial Court has jurisdiction over the petition for corporate rehabilitation of the bank? We rule: no, because banking institutions are under the exclusive jurisdiction of the BSP through its Monetary Board,” the CA said in a decision penned by Associate Justice Edgardo A. Camello.

Quoting Republic Act No. 7653 or the New Central Bank Act, the CA said that “the actions of the Monetary Board taken under this section or under Section 29 of this Act shall be final and executory, and may not be restrained or set aside by the court except on petition for certiorari on the ground that the action taken was in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction.”

As for the secondary question of whether or not the revocation of AsiaBank’s banking license automatically converted it into an ordinary corporation (and subject to the regular jurisdiction of the RTC), the CA also answered no.

The CA explained in its decision that assuming that the AsiaBank can reopen as an ordinary corporation, it has to comply with the following requirements first: amend its charter or articles of incorporation and by-laws; change its purpose; and obtain prior favorable recommendation from the BSP and approval of the Securities and Exchange Commission.

“Before the lower court can acquire jurisdiction over AsiaBank, it has to be converted first into an ordinary corporation by complying with the procedures laid down in the Corporation Code. Absent such compliance, AsiaBank is still a bank in the eyes of the law subject to the supervision and jurisdiction of petition BSP,” the CA said.

In explaining why AsiaBank’s depositors’ position must fail, the CA cited the Philippine Veterans Bank Employees Union v. Vega case, which laid down the concept of liquidation as “diametrically opposed” or contrary to the concept of rehabilitation.

“Apparently though, the depositors are not genuinely after the restoration of AsiaBank. The petition for rehabilitation is just their strategic way to stop its liquidation and dissolution, and ultimately get their deposits still intact,” the appellate court said.

The CA further pointed out: “We do commiserate with that perfectly human feeling (of grief) that impelled this suit. Yet banking business is so impressed with public interest that to deny this petition and allow the rehabilitation of a bank, which to the mind of the BSP is utterly unable to resume its business with safety to all concerned, is to expose the general public to a clear and present financial peril.”

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