Banking is a public trust

published 20 Oct 2007

Tagaytay City is known for many things: Cool weather, great view, a multitude of restaurants and coffee shops, flowers and fruits by the highway. What’s not known to many is that it is also here, near where the road forks by the gas station and where premium beef is sold, where a thrift bank so insidiously violates its very essence—to put its clients’ welfare above all.

The owners of this bank are members of a prominent political and business family. The last name has the distinction of old-rich fame.

A branch of this family only actually bought into the ailing predecessor bank sometime in 2004. Subsequently, they formed a new management team, one that tried so earnestly to turn around operations and churn out profits.

By the second year, the bank started earning. Its audited financial statements as of end-2005,as originally issued by the external auditors, reflected a net income of P11 million. A modest profit, but a profit nonetheless. As is customary, the financials were published in a newspaper of general circulation.

Not too long afterwards, however, a corporate shakeup ensued. The bank president was not anymore elected to the board of directors during the June 2006 annual stockholders’ meeting, rendering him unqualified to continue his presidency.

The wife of the owner became officer-in-charge. A de facto general manager with the rank of vice president was appointed.

From this time up to the present, the owners have engaged in malicious prosecution of their former employees. And their motives for doing so are becoming more apparent by the day.

First off, they pressured the bank’s accounting manager into executing an affidavit claiming that the bank’s 2005 income, as reflected in the audited financial statements, was contrived, and that it was the former president who instructed her to window dress the bank’s financial condition. This manager, whom I already wrote about in this column (see “The price of ‘no’,” Jan. 12,), vehemently refused to do so, for the plain reason that no such instruction was ever given her.

When she made it clear she was not going along with the ploy, the harassment began. She was subjected to threats. She was reprimanded and talked down to in front of her subordinates. She was instructed to turn over all keys and passwords and was denied access to company documents. She was discriminated against because of her religion (she was a Born-Again Christian). Eventually, she was terminated. The bank claimed she disobeyed instructions. She has filed a case with the National Labor Relations Commission; the matter is now up for resolution by the labor arbiter.

Recently, too, the owners have filed a case against the former president, accusing him of knowingly violating a central bank circular and making false representations to the board to sway them into approving a memorandum of agreement with another company.

This latest scheme, at first glance, is a conundrum, really. Merit-wise, the case against their former chief executive appears not to hold water. The complaint itself is replete with sweeping statements. The claims are faulty or are half-truths. The gaps in logic are glaring. More importantly, no less than the central bank itself, in a final audit report, sustained the former president’s position that no such violation occurred.

So why exactly is this family taking all this trouble?

The bank also made money, albeit moderately, from January to May 2006. But since the re-organization middle of the year, things have gone downhill for this bank. This poor showing continued well into this year. Interim financial statements between January and June 2007 show monthly losses ranging from P560,000 to P850,000.

They have also been unable to address their alarming level of non-performing loans.

And all this is happening because 1) those who are running the bank have no significant banking experience; and 2) instead of focusing on making operations profitable, they are distracted by their efforts to blame the results of their incompetence on other people.

Consider these qualifications of the members of the board of directors: The chairman is a long-time ally of the family’s. He has endeared himself to them by being a loyal aide to the late matriarch, who was a former senator of the republic and who used to be majority shareholder of Solidbank.

The officer-in-charge, the wife of the former senator’s son, worked as a teller in the 1970s, first with Filipinas Bank and then Traders Royal Bank.

The de-facto general manager had a short stint with SGV and then hopped from one accounting engagement to another.

Another board member, the son of the chairman, had a one-year stint as account analyst of an insurance company in the early 1990s.

(This is contrary to almost a century of collective industry expertise among the two previous independent directors and the bank president.)

Perhaps the most sensible of them all is the husband of the OIC, who, acknowledging his lack of knowledge in banking, has wisely refrained from getting involved at all.

***

Ultimately, the issue goes beyond corporate maneuvers or the qualifications, if any, of the non-independent directors.

Amid all these, it is the bank’s depositors who are bound to suffer. Remember that those who entrust their cash for safekeeping in the bank are small and medium entrepreneurs in the Tagaytay area. They are restaurant owners, bed and breakfast operators, stall tenants and market vendors. They put their hard-earned money in this bank, believing its managers have their welfare as top priority.

Most likely, the female senator in the present Congress, who also carries the same prominent old-rich last name, would want to know what her cousins are up to. We don’t even know whether that labor case filed by the former accounting manager has even been reported to the Bangko Sentral. The central bank would surely say this bank could do better.

Banking is a public trust. These owners must ask themselves whether they are serious about this business. They should upgrade the expertise of their management team. They should shake off their persecutory tendencies. They should simply work at making the bank’s operations profitable.

Their depositors deserve nothing less.