Tuesday, 16 April 2024
Philippine bank penalised for $35 million fraud
The Philippine Central Bank penalized Metropolitan Bank & Trust Co. (Metrobank) by suspending some officials and ordering it to set aside funds following an internal fraud that cost the lender P1.75 billion ($35 million).
Sanctions ranged from a reprimand to the suspension of directors and officers who were complacent in their duties, the Bangko Sentral ng Pilipinas (BSP) said, without naming them. The nation’s second-largest lender was ordered to allocate about P4.45 billion of its capital to cover higher operational risk, the Central Bank said in a statement. There was no mention of a fine.
The stock rose after the action put an end to a probe that began in July, when the police arrested a Metrobank official on suspicion of loans into fake accounts that were transferred to other private accounts she owned.
The lender said in a statement that no customer was affected, describing it as an “isolated incident” where the suspect acted alone, has been apprehended and cases have been filed against her.
“The Central Bank sanctions have long been anticipated by the market,” said Charles William Ang, an analyst at Col Financial Group Inc. in Manila. “The fraud incident had been a drag on the lender’s shares and now that the regulator’s probe is finished, it clears any uncertainties.”
Metrobank advanced as much as 2.1 percent in Manila trading, bucking the Philippine benchmark index’s 1.3-percent drop. The stock has climbed 32 percent this year.
In deciding the penalties, the Central Bank said it took into account Metrobank’s strong financial condition and the corrective actions the company took to contain further financial damage. The lender owned by billionaire George Ty is sound, the regulator said.
Metrobank said it absorbed the losses from the fraud in the third quarter and will implement the Central Bank order.
“Whatever losses from the fraud have been accounted for by the bank, which addressed the issue early on,” said Eleanor Reyes, an analyst at Unicapital Securities Inc. “Fundamentally, Metrobank in itself is doing well and, if you look at the overall size of the bank, the fraud was an isolated case and just a small part of its operations.”
Separately, Metrobank acknowledged the examination concluded by the BSP on the P1.75-billion internal fraud case.
The bank appreciates the BSP’s affirmation of Metrobank’s strong financial condition, safety and soundness.
The board and senior management accept accountability and command responsibility for the incident and commits to implementing the directives. Metrobank assures the public that bank operations remain business as usual.
After conducting a 100-percent audit, the bank reiterates that no customer was affected. This is an isolated incident. The perpetrator acted alone and for her sole benefit. She has been apprehended and cases against her have been filed.
Metrobank proactively reviews and improves its systems, which is exactly how the fraud was detected. The bank’s control framework remains effective and even stronger. Thus, the BSP recognized the immediate actions taken by Metrobank, as well as the medium- to long-term initiatives that will serve to further improve governance, compliance and control.
With P2.0 trillion in assets and P210 billion in equity, Metrobank is in a strong position to set aside P4.45 billion of capital reserve, in line with the BSP’s directive.
In addition, the bank has proactively absorbed the entire amount related to this incident in the third quarter. Despite this, the growth momentum of the bank remains robust and results for the year are ahead of plan.
Re-disseminated by The Asian Banker from The Business Mirror
