CA upholds closure of Batangas rural bank owned by Gerardo Castillo: Undercapitalized by P300M

The Court of Appeals (CA) upheld a decision of government banking regulators to shut down a rural bank in Batangas in 2018 for serious lapses in its management.

In a 20-page decision written by Associate Justice Ramon Bato Jr. dated August 25 and made available on Tuesday, the CA’s sixth division dismissed the petition filed by Gerardo Castillo, majority stockholder of the Tiaong Rural Bank Inc. (TRBI) against the Philippine Deposit Insurance Corp. (PDIC) and the Monetary Board of the Bangko Sentral ng Pilipinas (BSP).

In August 2018, the BSP issued a resolution prohibiting TRBI from doing business while the PDIC issued a notice of closure against it.

The decision was based on the findings of the BSP’s examination department (ED) on the bank, which has eight branches in Calabarzon, during a regular examination in July 2017.

The ED noted several unaddressed weaknesses leading to net losses which continue to deplete TRBI’s capital.

It also noted that while TRBI reported that its capital adequacy ratio (CAR) and capital were above the government’s requirements, in truth, its adjusted capital was only P38.9 million and has a capital deficiency of P60.7 million.

The BSP also noted that “there was no express commitment from the stockholders on the required immediate capital infusion.”

A special examination by the BSP-ED later showed the bank’s precarious financial condition.

It pointed out that TRBI is significantly undercapitalized with a CAR of negative 21 percent and an adjusted capital of negative P203.5 million, or deficient by at least P300.3 million to meet the 10 percent minimum CAR and the minimum required capital of P30 million.

In upholding the BSP’s regulatory authority over banks, the CA said “the BSP is not simply a corporate entity but qualifies as an administrative agency created to carry out a particular governmental function, pursuant to a constitutional mandate”.

“As the country’s central monetary authority, the Constitution expressly grants the BSP the power of supervision over the operation of banks (and) its finding on matters of bank closure is accorded technical deference and even finality when supported by substantial evidence. Verily, by reason of the special knowledge and expertise of administrative departments over matters falling within their jurisdiction, they are in a better position to pass judgment thereon and their findings of fact in that regard are generally accorded respect, if not finality, by the courts,” the CA said. (PNA)

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