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BSP Clarifies Role in Unitrust Problem

01.11.2002

The Bangko Sentral ng Pilipinas clarified today its role in the issues leading to the closure of Unitrust Development Bank on January 4. There have been insinuations in the press that the BSP has been remiss in its duty to protect the depositing public.

BSP Governor Rafael B. Buenaventura said that the BSP took immediate steps from October 2, 2001 upon being advised of the transfer of ownership of Unitrust to a new set of stockholders, including Japanese nationals to make sure that the funds were secure and that the sale of the bank and the entry of new officers and directors were done in accordance with law and regulations.

The Governor said that as early as October 5, 2001, the BSP formally asked for the background of the new officers and directors to determine their competence and integrity under the BSP’s fit and proper rule. The Japanese designated officers were also told that they have to comply with the Anti-Dummy Law and get clearance from the Department of Justice. Buenaventura said the process in both instances was never completed because the composition of the Unitrust board of directors kept changing with incumbents being eased out for various reasons. No approvals were given by the BSP to anyone in the new set of stockholders up to this time.

BSP suspended the trust license of the bank and its authority to accept foreign currency deposits. The new owners were also told to stop the grant of loans to avert dissipation of the bank resources and to take steps to meet Unitrust’s capital deficiency of P161 million.

On October 9, 2001, the BSP also stopped two-page advertisements of Unitrust in the newspapers announcing an inordinate number of new positions with off-market salary rates and activities like insurance that are not within the functions of a thrift bank.

At the same time, regarding the Japanese nationals in the group the BSP requested Japanese and Philippine authorities in Japan, including two local banks with operations in Japan, to help determine the possible link of Mr. Genta Ogami or G. Cosmos with two Japanese companies – G. Universal Co. Ltd. and Minamoto Saiken Kaishu Co. Ltd., which claim to be new stockholders of Unitrust. To date information about them is incomplete and does not provide any basis for action on their qualification.

Buenaventura said what has made monitoring and appropriate intervention difficult was the ensuing squabbles among the new stockholders as well as the fact that the name of Mr. Genta Ogami, a Japanese who purportedly was the actual new owner of the bank, does not appear in any official document. Mr. Ogami is linked to an entirely different activity, the supposedly unauthorized sale of unregistered securities by a company called G. Cosmos.

Unitrust declared a bank holiday on January 4 following heavy withdrawals and the mass resignation of bank personnel in the last banking days in December. It is now under receivership with the Philippine Deposit Insurance Corporation as receiver.

Buenaventura said the BSP is preparing criminal charges against officers of Unitrust who were responsible for granting highly questionable loans that contributed to the financial difficulties of the bank. Meantime, the PDIC will now begin servicing depositors with up to P100,000 in deposits in accordance with law.

There are suggestions in the press that the BSP should have rescinded the sale of Unitrust when it became apparent that the new owners could not get their act together. Buenaventura said the BSP does not have the legal authority to nullify a consummated transfer of ownership. He said this is one of the amendments to the New Central Bank Act that the BSP is suggesting - to expand its supervisory powers to be able to intervene immediately in certain situations, which may include replacement and disqualification of officers and directors and/or closure of the bank to protect the interests of depositors and the general public.

The BSP also clarified that it had nothing to do with the problem of the unauthorized sale of unregistered securities by G. Cosmos Philippines, another company associated with Mr. Ogami. The BSP said the sale of securities is a function supervised by the SEC and G. Cosmos does not appear as being involved in Unitrust.

Buenaventura assured that the BSP is on top of the situation in Unitrust and has been taking steps to make sure that the laws are complied with and that erring parties that contributed to the bank failure are brought to court.

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