Urban Bank

Infobox_Company | company_name = Urban Bank | company_| company_type = Defunct; now part of Export and Industry Bank | company_slogan = Beyond banking. Lasting relationships. | foundation = Pasig City, Philippines (1980)| location = Makati City, Philippines
key_people = Fidel V. Ramos, Chairman Emeritus
Arsenio M. Bartolome III, Chairman
Teodoro C. Borlongan, President and CEO | num_employees = 600 (at closure) | industry = Finance and Insurance | products = Financial Services| homepage = [http://www.urbanbank.info/urbanweb/index.htm http://www.urbanbank.com] | operating profit = "NA"| revenue = P27.2 million PHP (1999) [http://www.urbanbank.info/urbanweb/ubi_financial.htm]

Urban Bank (PSE: UBI), also known by its initials (and ticker symbol) UBI, was one of the largest banks in the Philippines. The bank, along with its two subsidiaries, was arbitrarily closed by the Bangko Sentral ng Pilipinas and the Philippine Deposit Insurance Corporation on April 26, 2000. The bank subsequently merged with Export and Industry Bank (Exportbank) in 2001.

History

Urban Bank was incorporated on July 8, 1980 as a private development bank. Sometime later that year, the bank opened as a one-branch thrift bank in what is today Pasig City.

In 1981, Urban Bank was chosen by the government as one of twelve financial institutions legally permitted to trade government securities. By 1982, the bank became one of the few non-commercial banks licensed by the Bangko Sentral to accept checking accounts and accept foreign currency deposits and was also accredited by the Bureau of Internal Revenue as one of its tax collecting agents. After the BIR withdrew the authority to collect taxes from all collecting banks, Urban Bank was the first bank to be subsequently re-accredited by the BIR. By 1985, it became the largest originating bank for loans to the Pag-IBIG Fund for its National Shelter Program.

In 1987, Urban Bank became the first non-commercial bank to list on the Manila Stock Exchange and the Makati Stock Exchange (now the Philippine Stock Exchange) under the ticker symbol UBI. After its closure and subsequent merger with Export and Industry Bank, Urban Bank shares were re-listed on the PSE under Exportbank's ticker symbol, [http://www.pse.com.ph/html/ListedCompanies/listedcompanyinfo.jsp?securitySymbol=EIB EIB] .

Through its affiliate, Urbancorp Investments (UII), Urban Bank acquired in 1987 a stockbrokerage seat in the MkSE. The stockbrokerage license was subsequently transferred to Urbancorp Securities, a new subsidiary licensed to engage in securities dealership and brokerage.

In 1988, the Securities and Exchange Commission with the Bangko Sentral granted UII the license to operate as an investment house. In 1992, the Bangko Sentral granted UII the license to engage in the trust and funds management businesses.

In 1990, Urban Bank started its online computerization program and became the first non-commercial bank and the fifth bank to join the MegaLink ATM consortium. A year later, the bank was granted a license to operate as a commercial bank, and later in 1994, UBI became a universal bank, only to revert back to a commercial bank in 1997.

Other than becoming a universal bank in 1994, Urban Bank was also granted a licence to engage in quasi-bank operations as well. It was also in 1994 that Urban Bank was named Asia's best performing small bank by Thomson BankWatch. One of its subsidiaries, Urbancorp Realty Developers (URDI), listed on the PSE in 1996.

In 1995, Urban Bank launched its Virtual Banking Development Project, and by 1996, became the first Philippine bank to offer online banking. The Virtual Banking project was ISO 9001-certified from 1996 until the bank's closure in 2000 to meet international quality standards, making Urban Bank the first and only Philippine bank to earn this distinction. The objective of the project was to integrate banking services into an electronic platform to avoid the need for a large branch network. Later that year, Urban Bank launched a successful stock rights and public offer of its common shares, raising some 695 million pesos in fresh capital for the bank.

In 1997, Urban Bank incorporated a subsidiary, Urbancorp Development Bank (UDB), a thrift bank based in Cebu City. By 1998, owing to Urban Bank's solvency and stability, the Bangko Sentral cited UBI for its overall performance in solvency, liquidity, and management. The BSP's SLIP ratings system (which measures a bank's condition against the entire universal banking system) gave Urban Bank a score higher than the industry average, putting Urban Bank in a financial position better than most universal banks. At the time, Urban Bank was known for being one of the most solvent banks in the Philippines.

Later that year, Urban Bank embarked on a comprehensive mortgage banking program to promote housing sector activity and growth. The plan was implemented to meet the needs of the Philippine mortgage market: from developmental financing, to developer receivables financing, to buyer take-out, and to eventual securitization that would be publicly-listed. The bank vertically integrated itself with the investment house (Urbancorp Investments) and subsidiaries which would play vital roles in the program, which included insurance subsidiary Urbancorp Life and General Insurance and the Philippine Home Development Finance Corporation, a subsidiary formed to take care of home financing.

In February 2000, Urban Bank nearly concluded a merger with a smaller rival, Panasia Bank, only to fail after the BSP set new requirements on bank mergers. Due to this, Urban Bank set on a new strategy: to convert the bank into a public holding company. Even while becoming a holding company, Urban Bank would retain its three subsidiaries: UDB, URDI and UII. The holding company would then immediately infuse an additional equity of 1-2 billion pesos into the existing P50 million equity of UDB, thereby increasing its capital by 20-40 times, making it one of the biggest thrift banks in the country. Urban Bank's assets excluding its non-performing loans would then be transferred to UDB. The proposal was presented to the Bangko Sentral on March 9, 2000.

On April 25, 2000, Urban Bank declared a bank holiday to put a stop to the panic withdrawals that have been plaguing the bank, reaching up to 1-2 billion pesos on that day alone. Both Urban Bank and Urbancorp Investments suffered the run due to a jittery financial market at the hands of negative news that Urban Bank denies. The source for this negative news is, according to Urban Bank, the Bangko Sentral.

In the five weeks leading up the bank holiday, Urban Bank remained amazingly solvent. In those five weeks, Urban Bank and Urbancorp Investments were able to make good on three billion pesos worth of withdrawals without any assistance from the BSP or the Philippine Deposit Insurance Corporation (PDIC), a feat that would be impossible for a financial institution of a comparable size. Even when the bank closed, Urban Bank had two billion pesos and Urbancorp Investments had 355 million pesos in liquid and non-risk assets.

Less that twenty-four hours after the declaration of the holiday, the BSP's Monetary Board ordered the summary closure of Urban Bank and Urbancorp Development Bank and the virtual closure of Urbancorp Investments. However, the PDIC served upon UBI the closure order even before the Monetary Board met to deliberate on whether to keep Urban Bank open or not, even citing the resolution number. The board convened in light of three supervision and examination sector (SES) reports submitted to it by the Bangko Sentral. Urban Bank claims that the three SES reports submitted were false.

However, the fight to keep the bank open ultimately failed. Urban Bank and Urbancorp Development Bank were ordered closed under Section 30(a) of Republic Act No. 7653, the New Central Bank Act. In the 52-year history of the Bangko Sentral (under both the old and New Central Bank Acts), Urban Bank and Urbancorp Development Bank were the only banks ever ordered closed for reasons of illiquidity. UBI remains one of the largest, if not the largest, bank in Philippine banking history to have been ordered closed. However, UBI asserts that the BSP "even risked perjury before the Ombudsman to conceal this fact", that it was one of the biggest, if not the biggest, banks ever ordered closed for mere illiquidity and that, in reality, was a very stable bank with a very good (or excellent) track record.

Urban Bank and Urbancorp Investments eventually merged with Export and Industry Bank (Exportbank) in September 2001 with Exportbank as the surviving entity.

ubsidiaries and affiliates

Urban Bank was divided into the following subsidiaries and affiliates:

*Philippine Home Development Finance Corporation
*Urbancorp Development Bank
*Urbancorp Insurance Brokers
*Urbancorp Investments
*Urbancorp Life and General Insurance
*Urbancorp Realty Developers
*Urbancorp Securities
*Urbancorp Technologies
*Urbancorp Travel Services
*Urban Finance and Leasing Corporation

The charges

While Urban Bank was closed on the basis of illiquidity, its officers were accused of having a hand in the closure, through accusations from the BSP and the PDIC against thirteen Urban Bank officers and employees, including Teodoro Borlongan. With the BSP and the PDIC acting as complainants, they filed a total of five criminal complaints before the Philippine Department of Justice, from June 26 until November 15, 2000. Four of the complaints were for alleged estafa while two were related to economic sabotage. All charges were filed after the closure of Urban Bank.

Investigation Slip No. 1217

Investigation Slip No. 1217 was filed by the Bangko Sentral and the PDIC against Francisco Eizmendi, former president of San Miguel Corporation and a director of Urban Bank, for alleged estafa surrounding the partial pretermination of a five million-peso deposit he made with UBI.

The I.S. was first filed as Criminal Case No. 01-081 at the Makati City Regional Trial Court Branch 133 on June 26, 2000, then refiled as Criminal Case No. 02-2704 at Makati City RTC Branch 64, only to be re-ordered back to Branch 133. The case was eventually reassigned to Makati City RTC Branch 149. The case, heard by Judge Napoleon Inoturan, was refiled in 2002 and eventually heard by Judge Delia Panganiban.

Judge Inoturan decided the case in favor of defendant Eizmendi and chided the DOJ for filing the case, especially because Inoturan found that not one of the four required elements of estafa was alleged or found in the crime. It also deemed Eizmendi in "good faith". The prosecution did not challenge the verdict. Instead, on October 3, 2002, the case was refiled before Judge Panganiban, with the BSP and the PDIC insisting that it was "an entirely different case". However, Panganiban ruled that the case was refiled and that it came from the previous case that was filed before her. All that the BSP and the PDIC did was drop the name of Eizmendi and in turn substitute Urban Bank, the Bangko Sentral and the PDIC as the parties "damaged and prejudiced".

Incidentally, though, the five-million pesos deposited by Eizmendi were deposited in an account with Bank of Commerce under the name of Borlongan in trust for Eizmendi on July 11, 2000. It was deposited there after the supposed awarding of the assets of Urban Bank to Bank of Commerce and after the PDIC refused to accept the funds from Borlongan on May 17, 2000 despite its obligation as the receiver of UBI.

Urban Bank claims that the reason why the PDIC refused the funds was obvious: they would eventually file this and more cases against UBI officers. However, when Eizmendi requested his funds from Bank of Commerce in February 2002, the bank alleges that the Bangko Sentral intimidated Eizmendi to turn over his personal fund to Exportbank, the successor of Urban Bank. But, in a letter written by Eizmendi's lawyer on June 25, 2002, he alleges that the Bangko Sentral is demanding that he turn over his funds to Exportbank, as shown in the following excerpt:

:"Mr. Eizmendi, however, is being bothered by letters from Atty. Manuel M. Lazaro, who represents Bangko Sentral ng Pilipinas, and who has demanded that Mr. Eizmendi turn-over the amount of P5 million to EIB."

Investigation Slip No. 1436

Investigation Slip no. 1436 was filed by the Bangko Sentral and the PDIC against Lilibeth Fajardo, former Vice President of Finance at San Miguel Corporation and a member of the Urban Bank board. The case is similar to the one highlighted on Investigation Slip No. 1217, which is alleged estafa surrounding a one-million peso bank account with Urban Bank that was partially preterminated.

The case was filed as Criminal Case No. 01-2531 on July 31, 2000 at Makati City RTC Branch 147 on July 31, 2000. This case was heard by Judge Ma. Cristina Cornejo.

It was believed that Fajardo asked her associate to ask defendant Borlongan to preterminate her deposit with Urban Bank. However, she refused to accept the one-million peso partial withdrawal when the transaction was completed. Eventually, Borlongan deposited these funds with Bank of Commerce in his name in trust for Fajardo on July 11, 2000, some three weeks before this complaint was filed.

No verdict was issued, but a year later, on September 20, 2002, the prosecution inexplicably filed before the court a Motion to Admit Amended Information, which was not released. This was done after the court rejected Borlongan's Motion to Quash the Information. Two years later, on October 18, 2004, Borlongan filed before the Court of Appeals a petition after the judge presiding over that trial admitted the amended information and questionably denied his motion for a preliminary investigation into the charges.

Investigation Slip No. 1512

The Bangko Sentral and the PDIC accused Urban Bank officials of estafa related to economic sabotage in Investigation Slip No. 1512, a crime punishable under Presidential Decree No. 1689, a Marcos-era decree punishing estafa committed "by syndicates on rural banks, cooperatives, samahang nayons, farmers' associations and other institutions" with life imprisonment to death.

This case was filed as Criminal Case No. 00-2217 on September 11, 2000 at the Makati City RTC Branch 56. The case was heard by Judge Nemesio Felix, who eventually heard a similar case a month later.

This case at first was originally stipulated by the Department of Justice as non-bailable economic sabotage, but was later "modified" to bailable economic sabotage against all ten of the accused under P.D. 1689.

However, Urban Bank argues that the following evidence disprove the said charge and the similar charge below:

#Regulations of the Bangko Sentral that actually authorize such purchases
#A previous BSP examination which showed that it examined and allowed Urban Bank to purchase the loans of UII
#Minutes of board meetings held by Urban Bank executives approving the subject loans
#A favorable credit rating issued upon the two subject borrowers by the Credit Information Bureau as of end-1999, and
#The preliminary examination report issued by the Bangko Sentral on February 14, 2000, which rated almost all of the subject loans as acceptable risks (either as "unclassified" or "specially mentioned"), with a few as "substandard" and none as "doubtful" or "loss".

It is because of that evidence that Urban Bank argued that it was baseless for the BSP and the PDIC to label the subject loans as "garbage" and "trash" when it gave favorable ratings towards those loans two months before the closure of the bank. They said that for the past six years, ever since Urban Bank was granted its quasi-bank license in 1994, the Bangko Sentral has always examined the loan purchases Urban Bank has made, allowing it to transfer loans from UII under the BSP's own rules and regulations.

No verdict was issued but Urban Bank claims that the forgoing case exposes the malice of the BSP and the PDIC in filing these charges.

Investigation Slip No. 1708

In Investigation Slip No. 1708, the Bangko Sentral and the PDIC accused Urban Bank of estafa related to an accused illegal purchase of "trash" loans amounting to some 1.8 billion pesos on both April 24 and April 25, 2000.

This case was filed as Criminal Complaint Nos. 01-406 and 407 at the Makati City RTC Branch 56 on October 26, 2000. The cases were heard by Judge Nemesio Felix, the same judge that heard the case involving Investigation Slip No. 1512.

The case bears resemblance to the previous case just filed a month earlier (I.S. No. 1512). According to defendant Borlongan, Urban Bank acted within the bounds of law and BSP rules to buy the loans from its subsidiary, Urbancorp Investments (UII), as the only other alternative due to the refusal of the BSP to provide timely and sufficient assistance to stem the panic withdrawals that Urban Bank accuses were caused by the BSP.

Judge Felix ruled the case in favor of Urban Bank after it had been discovered that all funds of UBI and UII, including their trust departments, were accounted for. It was also stated that the loans were genuine, purchased lawfully, secured by adequate collateral and were covered by more than sufficient loan loss-reserves as required by the Bangko Sentral in examinations conducted in 1999 and 2000.

Investigation Slip No. 1828

The Bangko Sentral in Investigation Slip No. 1828 accused Urban Bank of violating Section 23 of Republic Act No. 337, the General Banking Act, and Monetary Board Resolution No. 628. This case was filed as Criminal Complaint Nos. 01-1915, 1916 and 1917 at the Makati City RTC Branch 146 and were all heard by Judge Cesar Santamaria.

Violation of the General Banking Act

Investigation Slip No. 1828 accused Urban Bank of violating Section 23 of Republic Act No. 337, the General Banking Act, in relation to Section X303 of the BSP Manual of Regulations for Banks. The section talks about loan limits to a single borrower, which are usually administrative in nature.

There is no historical precedent to this: the Bangko Sentral has never filed any criminal charges against banks that have violated that portion of the law. The usual punishment was a reprimand against the executives, but if done subsequently, more severe punishments, such as daily fines until the problem is resolved, are considered. However, Urban Bank accuses the BSP of jumping right into filing this case before giving it any sort of warning.

This case was decided in favor of the prosecution, but an appeal was filed by defendant Borlongan. A temporary restraining order had been issued by the Court of Appeals against the court deciding in the case from arraigning the accused.

Violation of Resolution No. 628

The BSP in Investigation Slip No. 1828 also accused Urban Bank of violating BSP Monetary Board Resolution No. 628, which is clearly administrative in nature. It talks about limits on loan exposure to real estate loans, which the Bangko Sentral claims Urban Bank failed to follow. Although the resolution exists, the resolution was never printed in the Official Gazette or in a newspaper of general circulation as required by law, as accused by defendant Borlongan.

The oddity in this case was that this case was filed in the last three days before Urban Bank declared a bank holiday, as they believed this was filed due to their accusation that the Bangko Sentral did not provide them sufficient financial assistance to curb the panic withdrawals.

upreme Court final ruling to proceed with P 4.5 billion estafa case against 4 officers

On April 18, 2008, the Supreme Court of the Philippines 2nd Division affirmed the appellate court’s judgment to proceed with the PHP 4.5 Billion (USD 109 Million) estafa case against the officers of Urban Bank, namely, Nida S. Santos, Milagros Santiago, Rowena Punzalan, Chulla Formanes, Loida O. Payonga and Amalia Ordas. [ [http://www.gmanews.tv/story/90037/(Update)-Supreme-Court-upholds-litigation-for-P45-B-bank-estafa-case www.gmanews.tv, Supreme Court upholds litigation for P4.5-B bank estafa case] ]

Comparison to Banco Filipino

In the Urban Bank case, Urban Bank president Borlongan compared the case of Urban Bank to that of Banco Filipino, which was closed for the same reasons. In a comparison of the cases, Urban Bank alleged that its treatment in its closure case was worse than that of Banco Filipino. The cases were compared on the following points:

ee also

*Export and Industry Bank
*MegaLink
*Teodoro Borlongan

External links

* [http://www.urbanbank.info Urban Bank]

References