Life after a Bank Run: The Bangko Kabayan Experience

Life after a Bank Run:Life after a Bank Run:The Bangko Kabayan ExperienceThe Bangko Kabayan Experience

2009 RBAP-MABS National Roundtable ConferenceMay 12-13, 2009

Hyatt Hotel and CasinoManila

Atty. Francis GanzonPresident, Bangko Kabayan

Bangko Kabayan Inc.

The Panic of 1978 :The Panic of 1978 :Mismanagement and FraudMismanagement and Fraud

Bangko Kabayan Inc.

Causes :Causes :

Loose managementLoose management

Internal FraudInternal Fraud

High delinquency – illiquidityHigh delinquency – illiquidity

Bangko Kabayan Inc.

Effect :Effect :

Loss of Public ConfidenceLoss of Public Confidence

Panic withdrawalsPanic withdrawals

Bangko Kabayan Inc.

Steps Taken :Steps Taken :

ReorganizationReorganization

ProfessionalizationProfessionalization

Deposit CampaignDeposit Campaign

Bangko Kabayan Inc.

Communication ProgramCommunication Program

Emergency Loan - BSPEmergency Loan - BSP

Aggressive Collection of Past DueAggressive Collection of Past Due

Disposition of Acquired AssetsDisposition of Acquired Assets

Bangko Kabayan Inc.

Reforms :Reforms :Recruitment and Hiring based Recruitment and Hiring based on Meriton Merit

Tight Internal Control SystemTight Internal Control System

Better Process and Documentation Better Process and Documentation in REM Loansin REM Loans

Deposits vs. Rediscounting as Deposits vs. Rediscounting as Source of Funds for loansSource of Funds for loans

Bangko Kabayan Inc.

Growth at the Expense Growth at the Expense of Liquidityof Liquidity

1993:1993:

Bangko Kabayan Inc.

Reforms :Reforms :

Adoption of Higher Liquidity Adoption of Higher Liquidity Level PolicyLevel Policy

Improve Treasury FunctionsImprove Treasury Functions

Bangko Kabayan Inc.

1996:1996:

Closure of Other Banks Closure of Other Banks

Bangko Kabayan Inc.

Strategies :Strategies :

High visibility of CEOHigh visibility of CEO

Transparency and Good Relations Transparency and Good Relations – Staff and Clients– Staff and Clients

Increase Liquidity – control loan Increase Liquidity – control loan releases, draw on credit linesreleases, draw on credit lines

Bangko Kabayan Inc.

Maintaining Unity in the OrganizationMaintaining Unity in the Organization

Strength of Faith, Vision and MissionStrength of Faith, Vision and Mission

Stockholder Support – personal Stockholder Support – personal funds and guaranteesfunds and guarantees

Bangko Kabayan Inc.

2001: Personal Tragedy2001: Personal Tragedy

Bangko Kabayan Inc.

Professional organization prepared Professional organization prepared to handle crisisto handle crisis

Morale support and offers for help Morale support and offers for help from fellow rural bankersfrom fellow rural bankers

Support from understanding Support from understanding regulatorsregulators

Bangko Kabayan Inc.

Fruits of years of relationship-Fruits of years of relationship-

building, transparency and building, transparency and

good governance!good governance!

Bangko Kabayan Inc.

Legacy Bank Closures - Legacy Bank Closures -

an Industry Crisis an Industry Crisis

Bangko Kabayan Inc.

Seeking a Common Solution – Seeking a Common Solution – putting up a united frontputting up a united front

Bangko Kabayan Inc.

Re-education of Public is KeyRe-education of Public is Key

Bangko Kabayan Inc.

Causes of Bank Run based on BK’s experience:

Internal Factors Mismanagement

Sacrificing liquidity for growth

Personal Tragedy

SUMMARYSUMMARY

Bangko Kabayan Inc.

External Factors

Political Upheaval

Closures of other financial institutions O causing crisis in public confidence 0 in the system

Peace and order breakdown

Bangko Kabayan Inc.

Appropriate Responses:Appropriate Responses:

Professionalization of the organization

Tight and effective internal control

Prudent liquidity management and O better treasury management

Internal Factors

Bangko Kabayan Inc.

Strong Communication and a culture O of transparency

Strong collection infrastructure and O management of delinquent accounts

Effective and quick disposition of 0 Acquired Assets

Bangko Kabayan Inc.

- a strong belief system that imbues everyone in the organization with inspiration and extraordinary persistence in the face of crisis.

Strong relationship management – O within the organization and with O clients, big and small, even when O there is no crisis.

Vision and Mission

Bangko Kabayan Inc.

External Factors

Maintain a comfortable liquidity coverMaintain a comfortable liquidity cover

Sources of funds lined upSources of funds lined up

Maintain high credibility with community, Maintain high credibility with community, 0 regulators and fellow rural bankers and regulators and fellow rural bankers and 0 financial institutions financial institutions

Bangko Kabayan Inc.

What can our microfinance clients What can our microfinance clients do for us? do for us?

Provide liquidityProvide liquidity

Spread good news and Spread good news and counter rumorscounter rumors

Bangko Kabayan Inc.

Take care of all stakeholders

– and they will take care of

you in times of need!

Bangko Kabayan Inc.