Risk and Regulation,

Risk and Regulation,

The Insurance Commission (IC) wants the Bangko Sentral ng Pilipinas (BSP) to investigate the United Coconut Planters Bank (UCPB) for allegedly mishandling the funds of the pre-need firm Provident Plans International Corp.

The regulator wrote a letter to Bangko Sentral Governor Nestor Espenilla Jr. asking for an investigation into the way UCPB has handled the trust fund deposits of Provident Plans, Insurance Commissioner Dennis Funa said in a statement over the weekend.

“This request was prompted by the letter from Siguion Reyna Montecillo & Ongsiako Law Offices, counsel of Provident Plans, to the IC alleging that UCPB committed gross negligence and fraudulent mismanagement of Provident Plans’ Trust Fund Deposits which resulted in the impairment of the required capital and deficiency in required trust fund of the said pre-need company,” he said.

“Upon evaluation of Provident Plans’ request, we deemed it proper to refer the same to the BSP considering that the regulatory and supervisory powers over UCPB are vested upon it,” Funa noted.

UCPB welcomes the initiative of the commission, saying it gives the bank the opportunity to clarify its position on the matter.

Funa said the commission is requiring UCPB to reply to the allegations made by Provident Plans.

Before UCPB was appointed as trustee of Provident Plans, the trust fund was managed by the Export and Industry Bank (EIB), according to the commission.

EIB invested the fund in its seven-year “Expert 7 Time Deposit” which features a double-your-money scheme and comes in the form of zero coupon government securities and a guaranteed gross interest rate of 17.86 percent per year.

After UCPB replaced EIB as trustee bank in 2010, the trust fund stayed with the EIB time deposit scheme.

“Despite possession of information regarding EIB’s precarious financial condition and the concerns raised by Provident, UCPB did not lift a finger to pre-terminate the Expert 7 Time Deposit. Instead, UCPB banked heavily on the supposed plan of Banco de Oro to acquire EIB and offered this as an excuse to Provident to justify its inaction,” according to Provident Plans.

Provident Plans was among the companies the IC found financially deficient after the pre-need industry was placed under the regulatory supervision of the commission in 2010, in line with Republic Act 9829. Pre-need firms were previously supervised by the Securities and Exchange Commission (SEC).

The latest letter submitted by Provident Plans to the commission, the pre-need firm was in the process of negotiating with new investors to either acquire or invest in the company on top of raising new funds as part of its capital build-up program.

In a separate statement, UCPB welcomed the proposal by the IC but iterated that its Trust Banking Group exercised prudence in managing the firm’s account—well within sound banking practices and prevailing regulations of the central bank.

“We shall provide the central bank all the information it needs so it can study the issue closely. We are confident that the BSP will affirm UCPB’s due diligence as a trustee bank,” UCPB spokesperson Ildefonso Jimenez said.

Re-disseminated by The Asian Banker from The Manila Times