Banking sector backs Metrobank to pull through P900 M fraud case

MANILA, Philippines – The country’s banking sector and its regulators have given their vote of confidence to Ty-led Metropolitan Bank & Trust Co (Metrobank) as it deals with the fallout from its multimillion peso internal fraud and a looming investigation into its internal controls.

A Philippine Daily Inquirer report on Friday, July 21, detailed how Metrobank was victimized by one of its own Vice-Presidents in an internal fraud case that amounts to at least P900 million and could possibly rise to P2.5 billion.

Bangko Sentral ng Pilipinas (BSP) Governor Nestor Espenilla Jr said that the banking industry is well capitalized and remains resilient despite a string of mishaps that have hit the country’s largest banks in the past year.

“These things happen. They're isolated. And banks, as I've said, are well-capitalized that's why banks have controls so that these kinds of things can be mitigated and withstood,” he added.

Metrobank is the country’s second largest bank in terms of total assets with P1.9 trillion as of Q1 2017. It booked a net income of P18.09 billion last year as well as profit of P6.21 billion for the start of this year.

The bank's stock took a hit on Friday, however, falling by 5.03% to 86.90 at the close of trading. The bank's parent firm GT Capital also saw it stock fall by 2.85% to 1,195

BSP investigation

The BSP said it will conduct its own investigation into the internal fraud that will be separate from that of National Bureau of Investigation’s (NBI) own inquiry into the matter.

“We're looking into it. We have to look into the circumstances and the facts around it. That's really all that the BSP can say for now,” Espenilla said.

“Our concern is on bank supervision matters," he noted, "so potentially a crime may have been committed, so that's a police matter and that's really where the NBI plays a role. They have their own role and we have our own from a banking supervision view”".

“No system is perfect but the bank is expected to be resilient to these things. And I have no concern that the bank can't handle these things,” Espenilla added.

The House of Representatives’ Banking committee, meanwhile has announced it will summon representatives from both the BSP and Metrobank to explain how the incident could have occurred.

The fraud case is the latest in a string of issues that have hit the local banking industry over the last few months, notably Rizal Commercial Banking Corporation's (RCBC) involvement in unwittingly laundering $81 million during the Bangladeshi Bank Heist and Bank of the Philippine Islands' (BPI) system glitch which resulted in a 2 day shutdown of its electronic channels last month.

Banco de Oro (BDO) was also recently the target of multiple ATM-skimming attacks while earlier this month Union Bank was also the victim of internal fraud albeit on smaller scale.

BDO Nomura Securities Chairman Eduardo Francisco said that he does not believe the looming BSP investigation would result in a drastic tightening of banking regulations.

“Generally, we have adequate controls and knowing the BSP they won’t do a knee-jerk reaction and suddenly tighten everything. It just so happens that of course Metrobank is the [country’s] second largest bank,” he said at a press conference on the same day.

“I hope it won’t spill over into the rest of the banking industry. BPI in fact was a bigger situation only because a lot of people were affected. [The Metrobank situation] will effect possibly affect the bank’s earnings from a foundational perspective but from a transactional perspective it should have no effect on customers,” he added.

The Bankers Association of the Philippines (BAP) also backed Metrobank to resolve the situation quickly noting in a statement that “it appears to be an isolated incident and we are confident the facts will arise from the ongoing investigations being carried out by both Metrobank and the BSP.”

“Such an incident is quite unfortunate but we wish to reiterate that banks have established internal controls and systems and instituted separation of functions designed to help prevent crimes of this nature from happening,” it added. – with reports from Chris Schnabel/Rappler.com