Philippine Bank Penalized for $35 Million Fraud; Shares Rise

Updated on
  • Ordered to allocate capital for risk, directors suspended
  • Metrobank says it absorbed fraud amount, to set aside more

The Philippine central bank penalized Metropolitan Bank & Trust Co. by suspending some officials and ordering it to set aside funds following an internal fraud that cost the lender 1.75 billion pesos ($35 million).

Sanctions ranged from a reprimand to the suspension of directors and officers who were complacent in their duties, the Bangko Sentral ng Pilipinas said, without naming them. The nation’s second-largest lender was ordered to allocate about 4.45 billion pesos of its capital to cover higher operational risk, the central bank said in a statement. There was no mention of a fine.

The stock rose after the action put an end to a probe that began in July when police arrested a Metrobank official on suspicion of funneling loans into fake accounts that were transferred to other private accounts she owned. The lender said in a statement that no customer was affected, describing it as an “isolated incident” where the suspect acted alone, has been apprehended and cases have been filed against her.

“The central bank sanctions have long been anticipated by the market,” said Charles William Ang, an analyst at Col Financial Group Inc. in Manila. “The fraud incident had been a drag on the lender’s shares and now that the regulator’s probe is finished, it clears any uncertainties.”

Shares Rise

Metrobank advanced as much as 2.1 percent in Manila trading, bucking the Philippine benchmark index’s 1.3 percent drop. The stock has climbed 32 percent this year.

In deciding the penalties, the central bank said it took into account Metrobank’s strong financial condition and the corrective actions the company took to contain further financial damage. The lender owned by billionaire George Ty is sound, the regulator said.

Metrobank said it absorbed the losses from the fraud in the third quarter and will implement the central bank order.

“Whatever losses from the fraud have been accounted for by the bank, which addressed the issue early on,” said Eleanor Reyes, an analyst at Unicapital Securities Inc. “Fundamentally, Metrobank in itself is doing well and if you look at the overall size of the bank, the fraud was an isolated case and just a small part of its operations.”

— With assistance by Norman P Aquino, and Ditas B Lopez

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