The former president of Maximum Savings Bank Inc. has issued a challenge to both the Bangko Sentral ng Pilipinas (BSP) and the Philippine Deposit Insurance Corp. (PDIC) to substantiate allegations of insolvency at the time of the bank’s closure on November 8, 2019.
The concepts of insolvency and illiquidity serve as grounds for a bank’s closure.
The Monetary Board’s decision to shutter Max Bank on the same day as AMA Rural Savings Bank of Mandaluyong raised eyebrows, particularly given that the Supreme Court previously deemed the BSP’s closure of AMA Bank a grave abuse of authority, resulting in its mandated reopening.
In a six-page legal filing presented to the Supreme Court on June 13, 2022, former Max Bank president Josef-Dax C. Aguilar called upon the highest court to compel PDIC to release its takeover report. He argued that this report constitutes the “best evidence to show whether or not Maxbank is indeed insolvent or not at the time of its closure.”
Aguilar contended that PDIC’s petition for Max Bank’s liquidation, dated October 27, 2021, would reveal that the estimated realizable value of the bank’s assets was P1.28 billion, while its liabilities amounted to only P1.218 billion.
“There was an excess of assets over liabilities in the amount of no less than P58,163,284.23 when respondent PDIC took over the affairs and properties of Maxbank on 8 November 2019. This belied respondent (BSP) claim that Maxbank was insolvent at the time of its closure on 9 November 2019,” Aguilar said.
Aguilar, a former BSP examiner, challenged conventional wisdom by presenting a contrasting view. He delved into statistical comparisons, noting that the estimated realizable value of assets to liabilities ratio (ERVA) for banks closed by PDIC as of 2019 stood at 29.83%—indicating an asset shortfall. Aguilar further noted that this ratio for 2020 was 30.64% for 361 banks, bolstering the assertion of insolvency.
“This means that for every peso of liability, only 30 centavos will be paid and the remaining 70 centavos of liability will receive nothing. This is the concept of insolvency or in the ordinary parlance: bangkarote. This is a plain and honest explanation and does not require any creative accounting,” he said.
Refuting insolvency allegations against Maxbank, Aguilar said that the bank’s ERVA of P1.277 billion stands at 104.77% of its liability of P1.218 billion.
He argued that this data supports the conclusion that all of the bank’s liabilities would be met, leaving no room for losses on the creditors’ part.