Pimentel Hits Dubious P25-B Bailout and Reverse Privatization of PNB.(Main News)

Article excerpt


Senate Minority Leader Aquilino Q. Pimentel Jr. submitted yesterday a dissenting opinion to the report of three Senate committees giving the green light to a R25-billion loan bailout for the ?financially troubled? Philippine National Bank (PNB) where businessman Lucio Tan controls 66.38 percent of its stocks, while the government, a mere 16.58 percent.

"As things now stand, I am not convinced that the new bailout of the PNB by the government through the PDIC (Philippine Deposit Insurance Corp. and the Bangko Sentral ng Pilipinas or (BSP) is the right thing to do. I believe that the people are again being set up to pay for the mismanagement - to use a kind word - of the PNB under Mr. Tan," Pimentel said.

In his two-page dissenting opinion to the 19-page report of three Senate committees presided mainly by Sen. John H. Osme?a, chairman of the Senate finance committee, Pimentel asked whether "we are not wittingly perpetrating a fairly recent anomalous practice of getting the people to pay for the losses of a businessman."

"Business risks are apparently no longer the risks of businessmen. These risks are borne by the people who have nothing to do with the failing business and do not benefit from transactions entered into by the business concerned, in this case, the PNB, "Pimentel said..

"I see the bailout plan as a damnable, diabolical, and execrable undertaking that I must denounce with all the vehemence at my command. And with all due respects to the chair (Senator Osme?a), who is my friend, I do so in this explanation of my vote," Pimentel added.

The joint inquiry by the Osme?a committee, along with the Senate government corporations and public enterprises committee and the Senate banks, financial institutions, and currencies was triggered by a Senate resolution of Osme?a and a privilege speech of Pimentel last Feb. 12 entitled "The Reverse Privatization of the PNB."

Both resolution and privilege speech sought the inquiry into the financial assistance extended by the BSP and the PDIC to PNB that led to the formulation of a rehabilitation plan as embodied in their memorandum of agreement (MOA).

The MOA binds the PDIC to assume the BSP loan of PNB, assume the PNB loans of some local government units (LGUs), government-owned or controlled corporations (GOCCs), and other government agencies through "dacion en pago;" and enter a debt-to-equity agreement that, in effect, reverses the privatization of PNB.

The PNB, which approximately owns 7 per cent of the total assets of the Philippine banking system, was originally established as a governmentowned bank on July 22, 1915, and functioned as the de facto Central Bank of the country until 1949. In 1980, it became the first universal bank in the country. It has a deposit base of R120 billion, of which R40 billion is insured with PDIC.

The executive summary of the joint Senate committee report stated that the PNB was already experiencing reserve deficiencies even before Tan finally took over the bank in 1999.

"Thus, when the PNB suffered from heavy withdrawals by its big depositors during the period from September, 2000, to early October, 2000, the balance of demand deposit account fell below the normal operating levels and placed the bank at the danger of losing. …