FINANCIAL MANAGEMENT 2: Management of Banking and Financial Institutions
Case Study for Banco Filipino Closure
Submitted by:
Birog, Kristine Louise L.
Duco, Dunek Dan F.
Lucillo, Gian Carlo C.
Tismo, Kynan Mari E.
Racaza, John Andrei
Submitted to:
Ms. Jholina Kris B. Hernandez
FINM 2 – B1
August 8, 2020
I. Executive Summary
Banco Filipino (formerly known as Banco Filipino Savings and Mortgage Bank) was
once a well-known thrift bank in the Philippines. It was once most popular bank in the
Philippines with its slogan “Subok na Matibay, Subok na Matatag”. Banco Filipino reached
the point where it receives a lot of achievements, which other banks could not have nor
achieve at that time. Achieving success such as becoming the first all-woman bank,
becoming the largest savings bank in the Philippines, the first bank to process online
transactions in real time, and started expanding into the countryside makes Banco Filipino
more attractive to investors and depositors. And that is why, it grew bigger by having 89
branches, 4 billion pesos’ worth of assets, 3 million customers, and 3,000 shareholders.
However, despite of these achievements nor being on top still, Banco Filipino
encountered big challenges such as, its closure on January 25, 1985 based on illiquidity and
insolvency. But, this challenge does not stop Banco Filipino to operate in the banking
industry. It was reopened in 1994, trying to reestablish itself by striving to be in the market
as they continuously innovate and study the market. It continued to gain its popularity back
by having unique personalize services. However, it failed again and decided to voluntarily
closed its branches due to illiquidity and insolvency since its liabilities were greater than its
assets which is explicitly prohibited by law.
These problems or issues are definitely questionable since, Banco Filipino has a lot of
achievements that makes them on top and far different from others, which is an advantage.
But, evidence shows according to BSP that the bank’s top officers mismanaged their
depositor’s money. Therefore, Banco Filipino being mismanaged, is one big reason why it
failed not just once but twice. And it shows that nothing changes when it reopened in 1994
because, it failed again.
As an alternative solution, the bank should establish stricter practices because,
Banco Filipino is at high risk of illiquidity and bankruptcy. They should not come up with
offers to the public or depositors that will not make their business collapsed. Banco Filipino
should maintain better innovation in order to compete in the market and should also
strengthen their marketing strategy.
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One of the purpose in this study, is to point out the problems of Banco Filipino, in
which, these could be the reasons why Banco Filipino failed or collapsed twice. This study
also seeks to identify certain ways in making Banco Filipino better, by giving
recommendations in terms of its operations and services in order to regain the trust of
people despite of its failures.
Recommendations:
There should be a system of effective control, that covers all aspects of banking business and
its operations, to make sure that the bank achieved its goals and long-run profit targets in a
very manageable system.
The internals of the bank should have utilized more banking practices, like risk assessment to
verify and identify internal and external factors that could affect the goals of banks
performance.
The Banco Filipino should ensure that transactions are accurately recorded.
Management should also monitor the assets liquidity, quality, profitability performance.
They should not make any offers that are way out of their control.
II. Statement of the Problem
Banco Filipino became popular as a thrift bank in the Philippines because of its unique
services such as personalized services, in which, other banks cannot achieve. However, it is
questionable on why Banco Filipino was closed twice even though, it offers great services that makes
them more attractive to depositors and investors. One of Banco Filipino’s problem is that, its
liabilities were greater than its assets which is explicitly prohibited by law. It is definitely
questionable on how the bank’s liabilities exceeded its asset by 8.4 million php despite of its
successful and improved services that they offer, which makes them on top in our country. It also
shows that the bank’s top officers mismanaged their depositor’s money based on BSP’s sufficient
evidence that had been gathered. These problems have big impact towards the bank’s image
specially, it is a known bank in the country. If these problems would not be solved or still continue to
occur, then the bank’s closure might happen again and might be a reason that they could no longer
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reopen nor offer services. Also, people specially, investors and depositors might no longer trust the
bank’s services. These problems should be fixed in order to regain people’s trust as well as, to
improve the bank’s performance specially, on how it is managed.
III. Objectives
To be able to know the reasons why the bank failed/collapsed.
To recommend alternative solutions in order to fix or solve Banco Filipino’s issues or
problems.
To identify certain areas that needs improvement and to point out on what Banco
Filipino lacks.
To give alternative ways to improve Banco Filipino’s performance, services and
operations.
To provide insights to the existing problems in this study.
IV. Areas of Consideration
The bank’s inability to convert their assets into profits as BSP closed Banco
Filipino due to its illiquidity and insolvency since its liabilities were greater than
its assets
Lackluster management of depositor’s money by the top officers of Banco
Filipino
Going out of their way most of the time to try and be innovative as a bank,
possibly resulting to them violating numerous Central Bank laws and practices.
Lack of assets than can be exchanged to cash easily, probably because investors
are not willing to buy them anymore
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V. Alternative Solutions with Decision Criteria
1. The bank should establish stricter practices since they are at high risk of illiquidity and
bankruptcy.
Reliability - the customers of the bank are demented of what happened before so,
the company should come up to a new idea that will bring back glory to their
business.
Risk - costumers are looking for the safety of their money since, the company
already collapsed.
2. They should not come up with offers to the public or depositors that will make their business
collapsed instead, they should analyze how to make their business run for a long time.
Cost – Giving high benefits to depositors will have a high risk to the bank.
3. They should maintain innovation in their business to compete to competitors.
Performance - the customer is looking more effective and efficient bank.
4. They should strengthen their marketing strategy since the business had a poor marketing
strategy since the day they reopened in 1994.
Style and feature - providing the bank a more attractive strategy to boost their
investors and customers.
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VI. Recommended Solution, Implementation, and Justification
Banco Filipino had poor governance and financials. They were asked to shut before because
of economic condition, which was insolvency, however, it had been already resolved. Sadly, they
currently have a problem once more that solely shows that the bank is being managed awfully.
There should be a system of effective control, that covers all aspects of banking business and its
operations, to make sure that the bank achieved its goals and long-run profit targets in a very
manageable system. And the internals of the bank should have utilized more banking practices, like
risk assessment to verify and identify internal and external factors that could affect the goals of
banks performance. The Banco Filipino should ensure that transactions are accurately recorded and
that, the monetary and management coverage is reliable and complete. Management should also
monitor the assets liquidity, quality, profitability performance. Also, they should not make any offers
that are way out of their control and not end up collapsing their business.
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