SC affirms injunction on BSP’s closure order on AMA Rural Bank
THE SUPREME COURT (SC) has upheld an appellate court ruling that granted the shuttered AMA Rural Bank of Mandaluyong, Inc.’s appeal to stop the Bangko Sentral ng Pilipinas (BSP) from ordering its closure.
In a 17-page decision dated March 1 and made public on March 31, the court agreed with the Court of Appeals’ decision that said the BSP failed to provide legal grounds for the bank’s closure.
“Indeed, the totality of circumstances reveals the tangible efforts on the part of AMA Bank to comply with the directives of BSP,” the tribunal said.
“Thus, under the particular facts of this case, coupled with the public interest involved, the closure of AMA Bank is too harsh.”
In a decision dated Nov. 7, 2019, the Court of Appeals ordered the central bank to restore AMA Bank to fully operational status, saying the BSP abused its discretion in issuing the closure order.
The central bank in 2016 attained a cease-and-desist order (CDO) to stop a housing loan program of the bank that allegedly approved irregular and questionable loans to borrowers. The order also stopped the recognition of the bank’s income for capitalized interest and penalties.
The BSP ordered the bank’s closure in 2019 over alleged unsafe and unsound practices.
On Nov. 7, 2019, the Monetary Board issued MB Resolution No. 1705.D, which ordered the Philippine Deposit Insurance Corp. to take over the bank’s liquidation.
It said the AMA Bank can continue its business without involving probable losses to its depositors and creditors. As of Sept 30, 2019, AMA Bank’s total assets amounted to P2.8 billion.
The High Court said the appellate court had the authority to look into the Monetary Board’s practice of ordering the closure of banks without a prior hearing.
Under the law creating the BSP, the Monetary Board can order the closure and liquidation of a local lender if it has suspended payment of its deposit liabilities in the past 60 days, has insufficient realizable assets; cannot continue businesses without involving probable losses to depositors or creditors; and if it has violated a cease-and-desist order.
The tribunal said the central bank failed to establish the existence of the said grounds to warrant the closure of AMA Bank.
It added that AMA Bank did not “willfully” violate the 2016 cease-and-desist order, adding the bank showed efforts to comply with the CDO.
“There being no valid grounds that would justify AMA Bank’s closure, the inevitable conclusion is that MB Resolution No. 1705.D. is void,” it said. — John Victor D. Ordoñez
