Following the money
MANY BANKS—local and foreign—are said to be “salivating” at the prospect of bidding for (and winning) United Coconut Planters Bank (UCPB).
“That’s because it’s very rare that an opportunity to acquire a bank the size of UCPB ever comes up,” explains Jeronimo Kilayko, UCPB president and CEO. Not only prospective buyers are interested in the sale. Kilayko has also been making the rounds of the different UCPB branches to explain to employees the status of the sale preparations and their future with the bank.
Of course, nothing is firm yet until after the bidding scheduled for September, but Kilayko says employees have nothing to fear as they will be compensated if they choose not to remain with the bank after its acquisition by another entity. “What some old-timers say they’re concerned about is whether we will retain our name,” he admits, “although of course that all depends on who the new owner will be.”
The sale of UCPB, Kilayko explains, is in response to new local and international regulations calling for more bank integration and demanding greater capitalization. The sale should also bring UCPB out of the shadow of sequestration, since it has been involved in a long-standing dispute over the disposition of coconut levy funds collected during martial law. These include the P2.572-billion Coconut Industry Investment Fund (CIIF) currently secured by the bank, which has since grown to P74.86 billion as of December 2013. There is also the P14 billion held in trust at UCPB, representing shares in stocks of San Miguel Corp.
The bank was created in 1975 after the late dictator Ferdinand Marcos issued a presidential decree calling for, among other responsibilities, the provision of “readily available credit facilities to coconut farmers at preferential rates.” This led to the acquisition by the Philippine Coconut Authority of a majority share of First United Bank, the precursor of the UCPB. In time, UCPB would grow into a universal bank and become an official depository of government. But after the Edsa revolt in 1986, it was sequestered, with a board of government appointees including two farmer representatives overseeing its operations.
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READERS might remember a recent column on the suit filed in the Supreme Court by federations of coconut farmers’ groups questioning two executive orders that, among other things, called for the inventory of the coco levy funds, their transfer to the national treasury, and the privatization of assets, including the UCPB.
In 2012, the Supreme Court ruled that the coconut levy funds belonged to the government but that they should be used primarily for the “development of the coconut industry.” The two executive orders were issued ostensibly to facilitate the implementation of the Supreme Court decision, but the farmers’ groups, with farmer-leader (and former Philippine Coconut Authority head) Charlie Avila as spokesperson, say they are suspicious of the motivations of the Aquino administration in releasing the coconut levy funds for disposition.
For one, there is a fear that, by entering the virtual “black hole” that is the national treasury, the public, especially the coconut farmers, would no longer be able to keep track of where and for what purpose the billions in coco levy funds would be used. In contrast, as Kilayko pointed out, while the UCPB held the money in trust, farmers’ groups, especially the farmer-representatives on their board, could readily track and take account of the funds.
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BUT the lingering suspicion of the farmers’ groups over the reason(s) for the “rush” to dispose of the coco levy has or should have no relation to the proposed sale of the UCPB, its officers say.
“This (the sale) is simply for purposes of complying with regulations and for rationalizing our operations,” says Kilayko. Depending on how the courts rule, or if the government decides to wait for the passage of a law detailing the manner of disposing of the coco levy funds, Kilayko says they will obey all legal orders and turn over the funds it holds in trust to the rightful destination.
The trouble, one UCPB officer points out, is that “people still don’t trust the motives of politicians,” especially so close to national elections. There are “2016 reasons,” as Avila put it, to doubt the administration’s sincerity in assuming control of the coco levy funds. Instead, the farmers
support the creation of an independent body that would assume control of the funds and facilitate the use of the money to improve the coconut industry and ensure its continued longevity.
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KILAYKO and other UCPB officials are nevertheless grateful that their employees, some of whom have been with the bank for decades, as well as longtime faithful clients, have kept the faith with them despite the tug-of-war surrounding its ownership and operations.
One reason Kilayko is making the rounds of branches and talking with employees may be the need to assure all stakeholders that the move toward privatization is to ensure the bank’s ability to survive more challenging times, a challenge many other banks before it had already faced and overcome.
Since UCPB is also, at least in the beginning, “their” bank, I’m sure coconut farmers would also wish it the best, and are hoping that the infusion of fresh capital would make it more able to meet changing and difficult times.
