Urban Bank - History

History

Urban Bank was incorporated on July 8, 1980 as a private development bank. Sometime later that year, the bank opened as a one-branch thrift bank in what is today Pasig.

In 1981, Urban Bank was chosen by the government as one of twelve financial institutions legally permitted to trade government securities. By 1982, the bank became one of the few non-commercial banks licensed by the Bangko Sentral to accept checking accounts and accept foreign currency deposits and was also accredited by the Bureau of Internal Revenue as one of its tax collecting agents. After the BIR withdrew the authority to collect taxes from all collecting banks, Urban Bank was the first bank to be subsequently re-accredited by the BIR. By 1985, it became the largest originating bank for loans to the Pag-IBIG Fund for its National Shelter Program.

In 1987, Urban Bank became the first non-commercial bank to list on the Manila Stock Exchange and the Makati Stock Exchange (now the Philippine Stock Exchange) under the ticker symbol UBI. After its closure and subsequent merger with Export and Industry Bank, Urban Bank shares were re-listed on the PSE under Exportbank's ticker symbol, EIB.

Through its affiliate, Urbancorp Investments (UII), Urban Bank acquired in 1987 a stockbrokerage seat in the MkSE. The stockbrokerage license was subsequently transferred to Urbancorp Securities, a new subsidiary licensed to engage in securities dealership and brokerage.

In 1988, the Securities and Exchange Commission with the Bangko Sentral granted UII the license to operate as an investment house. In 1992, the Bangko Sentral granted UII the license to engage in the trust and funds management businesses.

In 1990, Urban Bank started its online computerization program and became the first non-commercial bank and the fifth bank to join the MegaLink ATM consortium. A year later, the bank was granted a license to operate as a commercial bank, and later in 1994, UBI became a universal bank, only to revert back to a commercial bank in 1997.

Other than becoming a universal bank in 1994, Urban Bank was also granted a licence to engage in quasi-bank operations as well. It was also in 1994 that Urban Bank was named Asia's best performing small bank by Thomson BankWatch. One of its subsidiaries, Urbancorp Realty Developers (URDI), listed on the PSE in 1996.

In 1995, Urban Bank launched its Virtual Banking Development Project, and by 1996, became the first Philippine bank to offer online banking. The Virtual Banking project was ISO 9001-certified from 1996 until the bank's closure in 2000 to meet international quality standards, making Urban Bank the first and only Philippine bank to earn this distinction. The objective of the project was to integrate banking services into an electronic platform to avoid the need for a large branch network. Later that year, Urban Bank launched a successful stock rights and public offer of its common shares, raising some 695 million pesos in fresh capital for the bank.

In 1997, Urban Bank incorporated a subsidiary, Urbancorp Development Bank (UDB), a thrift bank based in Cebu City. By 1998, owing to Urban Bank's solvency and stability, the Bangko Sentral cited UBI for its overall performance in solvency, liquidity, and management. The BSP's SLIP ratings system (which measures a bank's condition against the entire universal banking system) gave Urban Bank a score higher than the industry average, putting Urban Bank in a financial position better than most universal banks. At the time, Urban Bank was known for being one of the most solvent banks in the Philippines.

Later that year, Urban Bank embarked on a comprehensive mortgage banking program to promote housing sector activity and growth. The plan was implemented to meet the needs of the Philippine mortgage market: from developmental financing, to developer receivables financing, to buyer take-out, and to eventual securitization that would be publicly-listed. The bank vertically integrated itself with the investment house (Urbancorp Investments) and subsidiaries which would play vital roles in the program, which included insurance subsidiary Urbancorp Life and General Insurance and the Philippine Home Development Finance Corporation, a subsidiary formed to take care of home financing.

In February 2000, Urban Bank nearly concluded a merger with a smaller rival, Panasia Bank, only to fail after the BSP set new requirements on bank mergers. Due to this, Urban Bank set on a new strategy: to convert the bank into a public holding company. Even while becoming a holding company, Urban Bank would retain its three subsidiaries: UDB, URDI and UII. The holding company would then immediately infuse an additional equity of 1-2 billion pesos into the existing P50 million equity of UDB, thereby increasing its capital by 20-40 times, making it one of the biggest thrift banks in the country. Urban Bank's assets excluding its non-performing loans would then be transferred to UDB. The proposal was presented to the Bangko Sentral on March 9, 2000.

On April 25, 2000, Urban Bank declared a bank holiday to put a stop to the panic withdrawals that have been plaguing essentially the investment house, reaching up to 1-2 billion pesos on that day alone. Both Urban Bank and Urbancorp Investments suffered the run due to a jittery financial market at the hands of negative news that Urban Bank denies.

In the five weeks leading up the bank holiday, Urban Bank remained amazingly solvent. In those five weeks, Urban Bank and Urbancorp Investments were able to make good on three billion pesos worth of withdrawals without any assistance from the BSP or the Philippine Deposit Insurance Corporation (PDIC), a feat that would be impossible for a financial institution of a comparable size. Even when the bank closed, Urban Bank claimed it had two billion pesos and Urbancorp Investments had 355 million pesos in liquid and non-risk assets.

Less than twenty-four hours after the declaration of a voluntary bank holiday, and as a legal consequence of this, the BSP's Monetary Board ordered the summary closure of Urban Bank and Urbancorp Development Bank and the virtual closure of Urbancorp Investments. The PDIC, as a mandatory receiver of closed banks served upon UBI the closure order right after the Monetary Board met to deliberate on the voluntary bank holiday declared by Urban Bank citing the resolution number therein. The board decided based on previous meetings with the senior officers of the bank and the failed attempt to secure a "white knight" and in light of three supervision and examination sector (SES) reports submitted to it by the Bangko Sentral. Urban Bank claims that the three SES reports submitted were false. Eventually the Supreme Court dismissed all the cases filed by the officers of Urban Bank and found the closure in order.

However, the fight to keep the bank open ultimately failed as the existing shareholders could not put up the minimum capital required to continue the bank. Urban Bank and Urbancorp Development Bank were ordered closed under Section 30(a) of Republic Act No. 7653, the New Central Bank Act. In the 52-year history of the Bangko Sentral (under both the old and New Central Bank Acts), Urban Bank and Urbancorp Development Bank were the only banks, according to Urban Bank, ever ordered closed for reasons of illiquidity. UBI remains one of the largest, if not the largest, bank in Philippine banking history to have been ordered closed. However, UBI asserts that the BSP "even risked perjury before the Ombudsman to conceal this fact", that it was one of the biggest, if not the biggest, banks ever ordered closed for mere illiquidity and that, according to Urban Bank, was a very stable bank with a very good (or excellent) track record.

Urban Bank and Urbancorp Investments eventually merged with Export and Industry Bank (Exportbank) in September 2001 with Exportbank as the surviving entity.