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SC Voids Injunction Preventing Closure of ‘Legacy Banks’

Date posted - 24/11/2009
News

BA HOMEPAGE

Section: NEWS

 

 

SC Voids Injunction Preventing Closure of ‘Legacy Banks’

By Gleo Sp. Guerra

October 2009

The Supreme Court has declared null and void the writ of preliminary injunction issued by the Regional Trial Court (RTC) of Manila, Branch 28 enjoining the Banko Sentral ng Pilipinas (BSP) Monetary Bank (MB) from acting on the Reports of Examination (ROEs) finalizing the MB’s audit findings relative to 10 banks under the Legacy Group of Companies.

In a 19-page decision penned by Justice Presbitero J. Velasco, Jr., the Court granted the petition of the MB assailing the decision of the Court of Appeals (CA) upholding the issuance of the injunctive writ by the RTC. The RTC had ruled that submission of the ROEs to the MB before the respondent banks would violate the right to due process of the said banks, while the CA later held that the principles of fairness and transparency dictate that respondent banks are entitled to copies of the ROEs.

The 10 “Legacy banks” are the Rural Bank of Paranaque, Inc., Rural Bank of San Jose (Batangas), Inc., Rural Bank of Carmen (Cebu) Inc., Pilipino Rural Bank, Inc., Philippine Countryside Rural Bank Inc., Rural Bank of Calatagan (Batangas) Inc. (now Dynamic Rural Bank), Rural Bank of DARBCI, Inc., Rural Bank of Kananga (Leyte), Inc. (now First Interstate Rural Bank), Rural Bank of Bisayas Minglanilla (now Bank of East Asia), and San Pablo City Development Bank Inc.

Earlier, because of the temporary restraining order issued by the Court restraining implementation of the CA decision, the ROEs were submitted to the MB which then prohibited the respondent banks from transacting business and placed them under receivership.

The Court held that there is no provision of law or section in the BSP procedures requiring the BSP to give copies of the ROEs to respondent banks. It noted that the  ROEs are based on the list of findings/exceptions containing the  deficiencies found by the BSP Supervision and Examination  Department (SED) examiners which had been furnished  to respondent banks for their comment and undertaking of the remedial measures stated in the said lists. Despite these instructions, respondent banks failed to comply with the SED’s directive.

“Respondent banks are already aware of what is required of them by the BSP, and cannot claim violation of their right to due process simply because they are not furnished with copies of the ROEs,” the SC said.

The Court also ruled that the issuance by the RTC of the writ constitutes an unwarranted interference with the powers of the MB under RA 7653, the New Central Bank Act. It noted that under the law, the sanction of closure could be imposed upon a bank by BSP even without notice and hearing and that respondent banks’ remedy “is a subsequent one, which will determine whether the closure of the bank was attended by grave abuse of discretion. Judicial review enters the picture only after the MB has taken action; it cannot prevent such action by the MB.” (GR No. 184778, Bangko Sentral ng Pilipinas Monetary Board v. Hon. Antonio-Valenzuela, Octobe

 

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