Defective
published 18 February 2008
One fine Monday morning in breezy Tagaytay, people start lining up in front of the lone branch of their bank, a thrift bank. By nine o’clock, the bank still has not opened. The line gets longer. After a while, a branch officer steps out and makes an announcement: Those with deposit transactions may now go inside. Those who will withdraw may have to wait a few more minutes.
The officer is well liked among the depositors, mostly vendors in a nearby market. They have known her for years. They take her word and stay outside, chatting among themselves. The bank’s service vehicle arrives. The driver, straight from the head office some 10 minutes away, gets off, bag in hand. He is alone. The guards usher him into the branch. After a while, the officer makes another announcement: Those making withdrawals may now come in. The people are relieved. It is past 10 a.m.—they have been waiting too long and their market stalls are untended.
There’s a queue again the following morning. This time, bank officers tell the people the vault is actually defective and ask them to bear with the slight inconvenience.
The bank’s rank-and-file employees try hard to believe the story. If it were true, they feel something should at least be done to fix the vault. But they decide to keep their suggestions to themselves—the same way they have refrained from questioning their superiors why their pay slips have not been issued them since May 2007. It’s not the first time goings-on in this bank, owned by a prominent family, appear foggy.
The vault is not opened until Friday.
***
In 2006, the accounting manager of this same bank was fired after refusing to execute an affidavit falsely accusing its former president of instructing her to window-dress the company’s financial statements (see this column, The price of no, Jan. 12, 2007). Last December, the National Labor Relations Commission ruled in her favor and asked the bank to reinstate her, pay her back wages and damages. She is now in the process of collecting from the bank —it’s moving at turtle pace, though, because she suspects her victory has not yet been brought up by the vice president-comptroller, who is effectively running the bank’s day-to-day operations, before the Board of Directors.
This VP-comptroller also committed a most cruel human relations blunder during the holidays. During the bank’s Christmas party, right before everybody lined up for the food, he announced that three employees were in great danger of losing their jobs by the following month. The genius was in his refusal to name these employees, thus keeping all guessing and fretting, all through Christmas and New Year, who among them would be getting the axe. On the first working day of the year, a memorandum awaited two officers and one staff on their respective desks. A retrenchment program was apparently under way.
They had to write their bosses a letter asking for the criteria used to determine who exactly would be let go. They had strong reservations because they knew they were doing their jobs and their deputies, to which they were told to turn over their functions, were not as competent or driven as they were.
The three are still deciding whether or not to file labor suits even as they are sure they have a strong case against their former employers. They know it’s all politics, and they doubt if it’s worth the trouble. They say they may just choose to move on, and fast.
***
The bank’s Statement of Condition, published in Diyaryo Kabitenyo in its Jan. 21 to 27 issue, paints a picture of the company’s financial situation that should sound some alarm bells to the central bank.
Total assets, as of Dec. 31, 2007, stand at P90.5 million. Cash and cash items amount to a mere P900,000. Due from the central bank is P7.78 million while due from other banks is P9.36 million.
The other big item in the balance sheet is loans and receivables, which would, in this case, not be significant as the bank’s non-performing loan ratio is 63 percent.
On the other hand, total liabilities are at P55.29 million, P54 million of which is in deposit liabilities.
There is, of course, a host of criteria in determining a bank’s financial soundness. With respect to the depositors, however, the main concern—more than profitability and the paying capability of the bank’s borrowers—is the availability of their money, entrusted to the bank for safekeeping, when they need or want it. In banking parlance, it’s called liquidity. A bank has to be able to service depositors’ withdrawal needs. If it fails, it violates the public trust —its reason for being.
Before putting his hard-earned money in a bank, the prudent depositor should make a survey of all the institutions he is considering. Identify several banks’ pluses and minuses. Consider customer relations, proximity, interest rates and of course financial condition. This way he will be assured his funds will be in safe hands. At the slightest misgiving or doubt, he should pull the money out and transfer it to another. That’s assuming he is a deliberate and sophisticated investor.
But how about simple depositors and proprietors of small and medium size businesses? They don’t have the means to compare the benefits banks promise them. On the other hand, they choose the one that has a branch near the market where their fish, meat or fruit stalls are located. They don’t understand liquidity ratios or the principles of good corporate governance. They simply stick to the bank that has serviced them for several years, where the guards are friendly, the staff courteous and the officers seem to care about them.
In fact, their trust is too much that they take whatever they are told at face value— never mind that they are made to wait for hours standing in line just because the vault, ehem, is defective.
A vault is to a bank as an altar is to a church. And this bank’s vault—the figurative one, that is, the core that should be the basis of its clients’ trust—appears to be in need of serious mending. Regulators need to step in. Now.
