In December, following the testimony of a senior vice president of Equitable PCI Bank during the impeachment trial of former President Joseph Estrada, that he used the alias Jose Velarde in maintaining billion-peso accounts with the bank, its customers, particularly wealthy Chinese individuals, began massive withdrawals from the bank.
At the time, George Go, chairman of the bank said the bank suffered only about Ps3 billion ($62.5 million) in withdrawals, but current estimates now reveal an amount almost 10 times larger. Go resigned days after the revelation of Estradas Equitable PCI Bank accounts.
Then Finance Secretary Jose Pardo announced that Bangko Sentral (central bank) was willing to provide liquidity assistance but Equitable PCI Bank repeatedly denied that the bank run they were faced with was serious.
It turned out that while Bangko Sentral was publicly announcing in January that it was ready to support the bank, it had already provided liquidity late last year under the tightest of secrecy. The estimated repo facility provided by the central bank is between Ps20 billion-Ps30 billion.
Normally, repos are overnight funding sources that banks use to meet regulatory requirements under a fractional reserve central banking system. Being short term, repos are not asset-backed securities, but in this case the Bangko Sentral exacted security in the form of the banks real properties, and investment securities such as government treasury bills on its balance sheet. The security cover was allegedly 100%.
Equitable PCIs liabilities to the central bank shot up to Ps12.1 billion at year end, in sharp contrast to only Ps290 million reported in the third quarter.
According to central bank records, Equitable PCI is the number three bank in assets with Ps301 billion by year end. It is also number three in deposit liabilities with Ps178 billion. Its capital account is Ps46 billion. Its NPL is about 14.3%, compared to an industry average of 16%. The bank has about 1.9 million clients in over 500 branches.
Estrada was impeached because of his alleged involvement in illegal gambling. During the trial at the Senate, other anomalous transactions surfaced. Estrada allegedly used several alias but the most infamous one is the Jose Velarde account. On January 16, the Estrada-controlled Senate voted 11-10 against revealing additional details of the Jose Velarde accounts contained in the so-called Envelope 2.
This suppression of evidence angered the people, who eventually booted out Estrada on January 20 in a bloodless ouster.
Meanwhile, the Bangko Sentral is still under fire for its also secret bailout of Lucio Tan-controlled Philippine National Bank (PNB), where the government is a 16% owner. In September 2000, Bangko Sentral and the Philippine Deposit Insurance Corporation provided Ps25 billion in liquidity support for PNB.
In contrast, UrbanBank, once classified as a universal bank, requested a Ps5 billion-support in April 2000, but the monetary officials were only willing to provide Ps1.3 billion. UrbanBank found that offer inadequate and had no choice but to declare a bank holiday. As in the case of Equitable PCI, wealthy Chinese individuals caused the bank run of UrbanBank.
To the surprise of UrbanBank, the Monetary Board took over the bank and placed it under receivership. UrbanBank officials and the Monetary Board officials are now throwing criminal countercharges at each other.