Bangko Sentral ng Pilipinas today said the officers of Banco Filipino Savings and Mortgage Bank (BF) mismanaged money entrusted to them by their depositors by its continued lavish spending and allowing loans to remain unpaid, including billions in overdue loans granted to its stockholders, officers, and related companies.
Overall, 91% of the loans it granted were past due as of September 10, 2010. In particular, uncollected overdue loans to BF directors, officers, stockholders and their related interests (DOSRI) reached P2.2 billion or more than half of BF's total loan portfolio.
While yearly gross income of BF averaged P242.5 million between 2007-2009, its expenses for salaries, benefits and professional fees were 2.5 times more or an average of P597 million a year. In 2010, legal fees alone reached P245 million, of which P131 million was spent in the last quarter.
On the other hand, BF owes BSP about P4.4 billion in past due loans as of September 2010.
BF lured depositors with interest rates way above prevailing market rates. For instance, while most banks pay interest of 1% to 2% for special savings deposits, BF paid so much more - from 6% to 13.9% for special savings deposits. As a result, BF's interest expense was higher than its interest income. Between 2007-2009, its average negative net interest margin was P1 billion a year.
BSP also disclosed that a huge chunk of BF's assets are in fact losses that have been capitalized.
In the days before it was placed by BSP under PDIC receivership, BF was no longer able to settle its obligations as they fall due. For instance, due to insufficient balance in its demand deposit account with the BSP, the Philippine Clearing House Corporation returned about P789 million worth of BF checks as of March 15, 2011.
Also on March 15, the BSP started receiving complaints from BF depositors in different parts of the country that they were no longer able to withdraw their deposits from BF.
The BSP emphasized that in performing its regulatory role over banks, it always strives to strike a balance between full adherence to due process and the faithful enforcement of banking laws and prudential regulations that protect our banking system.