A CASE STUDY OF

BANCO FILIPINO CORPORATION

Group 2
Arbues, Lovely Fuentes
Cabudoy, Dave Alger Lagata
Cael, Junivie L.
Ceballos, Mary Grace
Dalay, Chrissa Luz Ubanan
Domia, Samuel Jr. Liloc
Garcia, Ellaine
Gargar, Jenefir L.
Lagata, Elmer Resty Basadre
Pasaol, Yvane Rey Gregorio
Pizarro, Adrian Dave Baldemor
Podot, Rodenio Jr. Procorato
Polo, Mary Joy Vales
Ritardo, Jonjay Jason Acosta
Silmaro, John Carlo Abatayo
Talha, Vivien Flaviano
Tanate, Hannah Briggeth Sabsal
Narbay, Ronelyn Jay Duterte
Navarro, Maria Theresa Amarga
Waminal, Joshua Eosa

BSAM 4
Sun 1:00-4:00

May 14, 2017

HISTORY

Banco Filipino started its operation in 1964, founded by Tomas Aguirre and
was known as one of the thrift bank. The Aguirre family together with the founder
control and manage the aforementioned bank. And in 1965, Banco Filipino
innovated and became the first all-woman bank, making it number 1 among the
banks then. Because of its continuous innovation of its services, in 1966 it became
the largest savings bank in the Philippines. It also became the first bank to process
online transactions in real time in 1969, giving customers the ability to deposit in
any online Banco Filipino Branch.
In 1970, Banco Filipino started expanding into the countryside with its first
provincial branch opening in Naga City. In 1972, the banks customer base grew
to one million customers, even in the midst of martial law. Banco Filipino
continuous to grew and was voted as the most preferred bank in Metro Manila in
the year 1975. By 1981, the Banco Filipino made a record that no other bank could
achieved at the same time, it had 89 branches, four billion pesos worth of assets,
three million customers and three thousand shareholders.

BRIEF DESCRIPTION

Subok Na Matibay, Subok na Matatag (Tested Strong, Proven Stable), the

slogan of once well-known and once most popular bank in the Philippines, the
Banco Filipino, formerly known as Banco Filipino Savings and Mortgage Bank. It
was a savings and loan association based in the Philippines but surprisingly, it was
closed twice in the year 1985 and in the year 2011 in the history of the banks in
the Philippines.
DISCUSSION

The Bangko Sentral ng Pilipinas (BSP) ordered closure of Banco Filipino

Savings and Mortgage Bank last March 17, 2011 for insolvency after its liabilities
overwhelmed its assets by P8.4 billion, prompting monetary authorities to prepare
charges against the board of directors and officials of the bank. In five separate
complaints, the BSP on Friday filed a string of charges against the Aguirre-owned
thrift bank. These include:

Wilful refusal to file audited financial statements for 2002 to 2007;

Falsification and issuance of false statements to hide the true financial
condition of the bank;
Wilful refusal to report directors, officers, stockholders, and other related
interest or DOSRI loans;
Wilful refusal to comply with numerous BSP laws and directives; and
Wilful refusal to cease the conduct of unsafe, hazardous, and unsound bank
practices.
BSP Office of Special Investigations director Alfonso Penaco IV alleged that
Banco Filipinos unsound bank practices led to the banks closure .
Last March 17, 2011, the BSP-MB placed BF under the receivership of the
Philippine Deposit Insurance Corp. (PDIC) after noting that the thrift bank was no
longer able to settle its obligations. This prompted the thrift bank to seek refuge
from the CA, which in turn ordered BF'S re-opening on January 27, 2012 under
the BSP-MB's comptrollership, complete with a viable rehabilitation plan, in order
to ensure [the] fast and immediate recovery of the bank from the ill-effects of the
illegal [closure]. The CA however later reversed its ruling and admitted it erred in
ordering the reopening of the bank when it considered the supposed appraisal
reports belatedly submitted by the BFs shareholders.
The CA said the state deposits insurer found that the thrift bank has P11.77
billion in total assets and P23.03 billion in liabilities when BF was placed under
PDICs receivership. The CA noted in its ruling BF's admission that even if the thrift
bank was able to secure an emergency loan from the BSP, such amount will just
be exhausted in a matter of days in view of the deposits [that] the bank currently
services for its depositors. This only confirms that Banco Filipino can no longer
independently resume its business with safety to its creditors, depositors and the
general public and/or that it can still operate without incurring losses, the CA
added. Mark Merueas/BM, GMA News
Bangko Sentral ng Pilipinas placed Banco Filipino under the receivership
of state-run Philippine Deposit Insurance Corporation (PDIC) The PDIC said it
discovered several "anomalous expenditures" incurred by the bank starting in 2000
until July 2003, representing travel expenses amounting to P669.6 million. Of this
amount, P621.2 million was unliquidated. Another amount of P48.4 million was
spent for the activities of Los Tamaraos Polo and Equestrian Center Inc., an
affiliate company of respondent Aguirre," it said. Other expenses include
sponsorships of a tournament in London, England, as well as personal items such
as clothing, toiletries, perfume and accessories, groceries, freight services, among
others. The respondents justified that their travel expenses were incurred to
prepare for Banco Filipino's operations as a universal bank, conduct image build-
up activities, expand contracts, and explore unspecified business opportunities,"
the PDIC said. Upon investigation, the expenses were found to be not at all related
to the business of the bank," it said. Jon

The list of respondents include:

Albert C. Aguirre Catherine A. Hernandez

Romeo M. Avila Diosdado Reyes
Maxy S. Abad Froilan Miranda
Nyreendelos Santos Joseph H. Velhagen Jr.
Alfredo B. Jimenez Jr. Katricia Anne Lising
Amaya M. Barretto Ma. Fe M. Relova
 Marivi Claire C. Llagas Carmelita C. Almera
Mylene Marasigan Edgardo Nacpil
Ralph Guarin Lualhati DL. Nicolas
Ramon M. Arcenas Ma. Elena B. Lindain
RoselieOdiamar Nanette Chavez
Serafin P. Tongo Rafael C. Hizon
Venicio S. Flores Renato C. Sacristia
Orlando O. Samson Roberta Afable
Teodoro Arcenas Jr. Teresita Dizon
Jovito N. Hernandez Teresita G. Piscasio
Anselma S. Cantada

The PDIC alleged that in 2001, the respondents took advantage of their
positions and connived with one another to sell the banks head office property to
BF Homes for P685 million and use the banks funds to pay for the purchase. The
alleged sale took place when BF Homes did not have the financial capacity to pay
for the sale, being under rehabilitation.
Records of the bank revealed that Banco Filipino granted questionable
loans to Vastland and Glamor. Both entities allegedly had negative credit standings
with at least 20 other banks. The loans were allegedly secured by overvalued
properties of BF Homes, BF General and BF Life. These loan proceeds were
supposedly to be used by Vastland and Glamor to acquire and develop real estate
properties in Cavite. However, the loan proceeds were allegedly diverted to fund
the checks of BF Homes, which were used to pay for the purchase of the head
office premises.
These transactions showed that the bank used its own funds to buy its own
property. The complaint also alleged that respondents planned to transfer its
service offices to a cheaper property located in Las Pias to help generate income
or savings for the bank to justify the sale of its head office property. However, the
bank did not relocate and instead rented the head office from BF Homes until the
bank was ordered closed in 2011. The PDIC also alleged that respondents made
Banco Filipino pay BF Homes rental fees higher than prevailing rates, ballooning
to P844.7 million from 2001 to 2011. The respondents were also said to have
committed more fraudulent activities and irregular transactions over the same 10-
year period.
The legal Basis of Banko Sentral ng Pilipinas for the closure of the Banco
Filipino is stated in section 30 of the RA No. 7653. According Sec. 30, Proceedings
in Receivership and Liquidation, stated that whenever, upon report of the head of
the supervising or examining department, the Monetary Board finds that a bank or
quasi-bask : (a) is unable to pay its liabilities as they became due in the ordinary
course of business; (b) has insufficient realizable assets as determined by the
Bangko Sentral to meet its liabilities; and involving acts or transactions which
amount to fraud or a dissipation of the assets of the institution ; in which cases, the
Monetary Board forbid the institution from doing business in the Philippines.
The BSP is coordinating closely with PDIC so that deposit insurance can
be paid out as soon as possible. In this connection, the condition, coverage, and
quality of the records and documents of Banco Filipino will be material in ensuring
immediate service to depositors, Espenilla said. The BSP said depositors with
balances of P5,000 and below accounting for about 53 percent of the total account
holders need not file their deposit insurance claims as the PDIC would immediately
process and mail payments within the week, while those with balances above
P5,000 would still have to be validated and need to file their claims.For depositors
with account balances of more than P5,000, claim forms will be distributed during
Depositors Forums to be conducted nationwide next week. During the forums,
procedures, instructions and requirements for filing claims will be discussed. The
schedule for claims receiving will be announced shortly after the examination of
bank records, PDIC president Jose Nograles said in a statement.
SWOT ANALYSIS OF BANCO FILIPINO
Strength
Highly Capitalized Organization with lots of investors and assets
Banco Filipino is already established and has made a name to the masses
specifically in the population of NCR
One of the oldest running banking company with continuous innovation of
the company.
Weakness
The inconsistence of the organization and the reason of closure of the
business
Poor marketing strategy
Less penetration on rural areas
Opportunities
The company can easily market and expand all throughout Metro Manila
Increase rate of urban migration
Increasing customer reach
Threats
People will never trust a bank being involved with any illegal case and has
been proven bankrupt
Due to its former issues, it will be hard to re-establish the organization.
CONCLUSION

Failing to plan is planning to fail. This often-heard quote from Alan Lakein,
the popular author on time management, is a reminder that many of the day-to-
day operational struggles that face in organizational life had their seeds sown in
the past, when they failed to think ahead. Mismanagement was the main factor
why closure happened to Banco Filipino.
As history, Banco Filipino was doing great and was known as the preferred
bank of the public, experienced being at the peak of success. They helped a lot of
Filipinos especially in financial aspects such as lending loans, saving and to our
economy for their taxes. But in the other phase, due too wilfully and intentionally
ignoring the different laws and regulations of the Bangko Sentral ng Pilipinas they
face their consequences, experienced closure.
The Banco Filipino was closed by the Bangko Sentral ng Pilipinas claiming
that Banco Filipino failed to service withdrawals and fund issued checks because
the liabilities exceeded its assets which is against Philippine law which states that
a banks assets must equal or be in excess of its liabilities and despite of
considerable time given by Bangko Sentral ng Pilipinas to the Board of Directors
or the Management of Banco Filipno they have failed to restore its financial health
and viability.
RECOMMENDATTION

At a simple level there are three basic levels of hierarchy in any business
the operational, the Management (tactical) and the Executive (strategic). If
these three basic levels considered and applied there different tasks, if the
corporation was managed effectively and efficiently then closure was not happened to
Banco Filipino. Therein lies the basis of many company failures. All three levels
need to be accountable and all the objectives must funnel upwards and downwards
to fulfil the success criteria for the business. Setting the goals/objectives and
measuring people on their achievement against them is at the heart of business
management.
No one can predict the future. No manager has a crystal ball in his or her
brief case. Every day has its own that couldnt see it coming. Nevertheless, many
severe day-to-day operating problems have, as their origin, a failure from months
or years earlier- a failure in strategic planning. Simply, absence of strategic
planning, or poor strategic plans, usually lead to tactical days youd rather forget
of operating nightmares.
The importance of strategic planning formally documented process for
deciding the handful of key decisions that an organisation, viewed as a corporate
whole, must get right in order to thrive over the next few years.
Strategic Planning in terms of creation of strategies that are aimed in
maximizing their planning for their future position considering the different external
factors that may affect the whole business where should the management must
improve to take advantage by the internal strengths. Banco Filipino must consider
this to avoid closure.
Credit Risk as one of the factor why closure happened to Banco Filipino.
Abiding to the By-laws was highly needed, they fail to follow the allocation of
budget. Theres always a limitation regarding on lending money especially towards
the officers or for personal used. They doesnt applied the due date of payment,
they just continue letting the problems go until they undergo the Ponzi scheme,
who earned notoriety for the technique in the 1920s, a company hands out returns
to investors not from the firms profits but from the investors own money or funds
that subsequent investors pour in. Proper handling of the Credit was really need,
estimating when and what will be the amount to be invested and going to be lend.
Limitation is advisable to avoid the negative consequences and by this, it can
decrease the risk of having a lot of liabilities to the company.
Management know a lot about how to decide a plan and very little about
how to carry it out. It should not be, management should plan thoroughly and carry
it out carefully.

APPENDICES

https://google.com/7ccmm8vu_htop/bancofilipino
http://why.banco.filipino.failed/google.com
http://criminal.case against bangkosentralngpilipinas/google.com
http://timelineofthebancofilipino.google.com.ph
http://bancofilipino.Rappler.com
http:facebook.banco.filipino.case.fb.com
http://bankosentralngpilipinas.pdf
http://Mark Merueas/BM, GMA News