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Thursday, August 28, 2003
Central Bank chief defends actions, vows to fight suspension (4:48 pm)
MANILA -- Central Bank Gov. Rafael Buenaventura said Thursday he did the right thing by closing down a troubled bank, and vowed to fight a court order that suspended him for the exercise of his regulatory powers.
An appellate court has ordered Buenaventura and four other central bank officials suspended for a year over alleged abuse of powers in the closure of Urban Bank in April 2000.
The five officials plan to contest the order and have remained in office. The controversy has rattled the investment community and helped send the peso into a steep slide.
"Very clearly, the closure of Urban Bank cannot be described as abrupt and done in haste. As such, we are confident of our stand: Professionally, legally, and morally. We believe therefore that, in time, our courts will rule in our favor," Buenaventura said in a speech to Central Bank staff.
The governor returned to work after a two-week official trip to the United States to preside over a Monetary Board meeting expected to draw up measures to stem the slide of the local currency.
Buenaventura described the charges against him and his subordinates as "misleading" and "shocking," stressing: "I assure you, we did the right thing."
He said the Urban Bank's principal shareholders themselves had declared a bank holiday because it "ran out of cash."
The bank management had used P4.6 billion (US$83.23 million) of depositors' money "to buy doubtful receivables of its investment affiliate Urbancorp Investment."
The proceeds were then used to "service massive withdrawals and pre-termination of placements of (the unit's) clients, among whom are relatives of bank officials."
He said the bank's former president and 11 other former officials are on trial for fraud.
"Clearly, the Monetary Board did the right thing by acting promptly and decisively in placing the bank under receivership. By doing so, we prevented the dissipation of its assets, protected the integrity of bank records, and safeguarded the interest of the depositors, creditors and the general public."
At the time of its closure, Urban Bank had non-performing loan ratios consistently above industry average, was deficient in capital, and had been depending heavily on interbank borrowings in excess of five billion pesos a month to meet mounting liquidity requirements.
The bank was later placed on receivership, rehabilitated and sold to another lender, Export and Industry Bank. AFP
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