Exportbank's liabilities dwarfed its assets — the BSP closed it and no buyer came

On April 26, 2012, the Monetary Board of the Bangko Sentral ng Pilipinas placed Export and Industry Bank under the receivership of the Philippine Deposit Insurance Corp., citing its inability to meet obligations as they fell due, insufficient realizable assets to meet liabilities, and the probable losses to depositors and creditors if it kept operating. The closure came after Exportbank itself notified the BSP that it intended to take a bank holiday. Its assets equaled only about 0.3 percent of the Philippine banking system, so regulators treated it as contained.

The balance sheet told the real story: as of December 31, 2012, Exportbank's assets had an estimated realizable value of P13.65 billion against liabilities of P24.67 billion — a deficiency of P11.02 billion. About P11 billion sat in uninsured deposits across 2,666 accounts, above the P500,000 deposit-insurance cap, and the PDIC warned that recoveries for those depositors would 'not be significant,' because preferred creditors — those who had extended loans to the bank — were paid first. Small depositors with P10,000 or less, 62 percent of accounts, were paid automatically from May 2012.

The rescue never materialized. BDO Unibank, the country's largest bank, had negotiated a takeover but walked away, citing legal problems, and disclosed on March 19, 2013 that it would not bid. The first auction failed on October 28, 2012 with no bids from pre-qualified banks; the rebidding deadline of March 18, 2013 passed without a single letter of interest. In April 2013 the Monetary Board directed the PDIC to proceed with liquidation, ending the year-long attempt to sell the bank as a going concern.

Assets of P13.65B against liabilities of P24.67B — a P11.02B hole. P11B of uninsured deposits across 2,666 accounts was expected to recover little.

Exportbank kept operating while liabilities outran realizable assets; the problem was solvency, not just liquidity, and no restructuring could close an P11 billion hole.

About P11 billion of funding sat above the P500,000 deposit-insurance cap, meaning the bank's largest funders were effectively its most exposed and least protected creditors.

Rehabilitation depended on a buyer appearing while the franchise still had value; once receivership and legal uncertainty set in, even a buyer of BDO's scale declined to bid.

The one-year gap between the bank holiday and the liquidation order was spent searching for a rescuer the market had already declined to provide.

A bank holiday is an insolvency confession: once realizable assets can't cover liabilities, no buyer comes — and large depositors find out they were unsecured lenders, not customers.

With the April 2013 liquidation directive, the PDIC filed a petition for court assistance in liquidation under Section 30 of the Central Bank Act, converting assets to money to settle claims in priority order. Preferred creditors would be paid before uninsured depositors, whose P11 billion was expected to recover 'not a significant' amount. The PDIC reported that after closing, deposits of P10,000 or less — 62 percent of all accounts — were returned automatically beginning May 2012.