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It was
not among the worst banking controversies of the time.
Others before, and still a couple immediately after,
required greater resources to rescue. There lie some of
its lingering iniquities.
In its
aftermath, smaller banks required funding in multiples
of the inadequate P1.3 billion extended to Urban Bank
Inc. (UBI). One required P9 billion. Another, P5
billion. But more than the disparities, the remedial
measures applied on an institution grown from a modest
savings facility seemed inordinately aggressive, harsh
and even draconian.
In that,
the tragedy of Urban Bank is unique. The largest
precedent was the Banco Filipino closure. But there lies
little comfort in that. Decades passed before a judicial
reversal corrected injustices. For Urban Bank, some of
its tragic consequences are irreversible.
Then, as
today, those initial measures inflicted seem more
punitive than curative. The debate among alternative
processes lingers, albeit academically argued among
those who can do little less than pray justice will
someday prevail over the cost of lives lost and careers
destroyed.
This
week is the eighth anniversary of that controversy. This
month is also the anniversary of an immeasurable life
tragically lost and a good man devoured by a
dysfunctional society increasingly callous and
cauterized to the avarice some believe undermined the
rehabilitation of a bank now lost in memory.
The
industry is stronger today as the governance of the
industry, its regulatory frameworks, the guidance and
oversight from international creditor agencies have
since fortified it.
For one,
current Bangko Sentral Governor Amando Tetangco Jr. is a
true career central banker, forged within the ranks,
apolitical and untainted. His professionalism goes
beyond “fit and proper” minimums. For another, the
increasing capitalization requisites and the mergers
that followed that lost era of stand-alone commercial
banks compelled a consolidation among competitors and
subsidiaries.
Unfortunately, this becomes ironic in the light of the
accusations against Urban Bank’s officers for measures
they took to protect depositors. Perhaps victimized by
its own transition and development, undue aggressiveness
and a politicized milieu, consolidations might have come
too late. Had those been available when Urban Bank
needed systemic consolidations, what happened might not
have happened.
But
April 26, 2000, was another time. Urban Bank’s
panic-induced bank run came when withdrawals were high
for the Holy Week hiatus. It was aggravated by rumors
causing inordinate liquidity panic in its subsidiary,
Urban Corp. Investments Inc. (UCII).
To
service demand, UCII secured its receivables, drawing
from Urban Bank against rediscounted real assets. Such
was par. In addition to overnight borrowing, where
consolidated balance sheets are required of universal
banks, the assets of one and the needs of another are
integrated.
Unfortunately, a critical withdrawal by a
government-controlled fund aggravated its liquidity
position. So did a controversial liquidation effected
after the bank technically closed.
Never
mind that the bank’s assets were far from insolvent as
the previous year’s audits did not indicate deficiencies
much less insolvency. Officially, a bank is audited once
year. In a report to the Monetary Board on November 19,
1999, for the official yearly audit period applicable,
Urban Bank “showed satisfactory financial condition. . .
.
For the last three years, its operations continued to be
profitable…UBI may be vulnerable to business
fluctuations and outside economic factors, but failure
is unlikely.”
By
Easter Tuesday, refused adequate withdrawal assistance
of anything over P800 million against assets that
exceeded that, the bank proper decided on a brief bank
holiday. Already, the authorities considered the bank
fit for sale. Within 48 hours regulatory officials said,
“We hope to open Urban Bank, or the new institution, in
30 days.”
Unfortunately, the bank emerged months later with a
drastically morphed structure, new owners and its
executives sullied with accusations of impropriety.
The
disparity between liquidity and solvency was at the
controversy’s core. Illiquid is when assets are not
readily convertible to cash. Insolvent is when
liabilities overwhelm assets. Was Urban Bank insolvent
per official audits available on April 26, 2000? One
requires conservation. The other, receivership and
liquidation. How can authorities confuse one for the
other?
So was
the spin of “trash receivables,” a nonbanking term
cavalierly applied to a publicity campaign that
subsequently ensued among protagonists. So also were
debates on sequencing appropriate cures either through
statutory conservation or receivership and liquidation
under the bank rehabilitation laws applicable in April
2000.
There
are more issues, some involving the illegality of
official acts, to document tampering, to the harassment
of private individuals and witnesses.
Most had
been singularly borne and challenged by Urban Bank’s
last chief executive officer, Teodoro Borlongan.
Virtually abandoned by colleagues, even by friends he
had risked his career to protect, the pressures Ted took
upon himself were enormous, inflicted by the lethal
ordnance, even the counterfoils many believed
retaliatory, that were applied against him. After all,
idealistic and romantic, perhaps even promethean and
quixotic, Ted challenged city hall.
His
career forcibly taken from him, when his public persona
was stripped off, what lay beneath, we soon realized,
was a good and decent man, a thoughtful friend, a caring
brother, a faithful husband and an exemplary father. His
life and career lost but with only his principles left
intact, against the arsenal of those he stood against,
it is undeniable that, in the end, where it counted,
with more character than critics can ever claim, Ted
triumphed. |
