Despite Wirecard, Philippine banking system sound–BAP

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By Tyrone Jasper C. Piad & Joel R. San Juan

THE Philippine financial system remains stable amid the Wirecard mess involving two local banking giants, the Bankers Association of the Philippines (BAP) guaranteed on Tuesday.

The bankers’ group “assures the public that the country’s financial system is sound and that very strict rules regarding the issuance of bank certifications are in place.”

While these documents may be forged or falsified, the BAP said their authenticity could be ascertained through meticulous verification processes conducted by appropriate institutions.

The BAP encouraged the public to have their bank certifications and documents from third parties be validated by the issuing bank to practice due diligence.

The BAP’s clean bill of health for the banking system came as the Department of Justice said the Filipino banker whose law firm had been tied to Wirecard has reported receiving death threats. The DOJ earlier ordered the National Bureau of Investigation (NBI) to investigate.

Meanwhile, the BAP said it was working with regulators to improve the banking industry’s system.

“We continue to work with the Bangko Sentral ng Pilipinas [BSP] and other government agencies to improve our processes, and our member banks are regularly and proactively strengthening security checks and systems to ensure integrity at every level,” the BAP said.

The names of two of the country’s biggest banks—BDO Unibank Inc. and Bank of the Philippine Islands (BPI)—were recently dragged into the fray after an accounting scandal involving the German financial technology firm Wirecard broke, but both banks denied Wirecard is a client.

The crisis erupted after Wirecard AG’s auditor, Ernst & Young, declined to approve the company’s 2019 accounts after finding out that $2.1-billion worth of funds were missing. This prompted Markus Braun to immediately leave his position as the company’s chief executive officer.

Tracing the assets led to the allegations that BDO and BPI were holding the missing amount. Both banks denied such claims right away, stressing that the documents supporting the allegations were falsified.

BPI and BDO said Wirecard was not even their client in the first place. Both banks have taken action against the employees involved in the falsification of documents.

The Central Bank also clarified that none of the alleged missing funds entered the Philippine banking system.

Wirecard, meanwhile, said that further assessment of the case indicates  the missing $2.1 billion likely never existed to begin with. The German firm has since hired investment bank Houlihan Lokey to iron out a new financing strategy to keep clientele.

Probe in Manila

In Manila, the Department of Justice ordered the National Bureau of Investigation, the Bureau of Immigration and the Anti-Money Laundering Council to look into the Wirecard controversy.

This, as former Wirecard chief operating officer Jan Marsalek reportedly stayed for a few days in the Philippines in March prior to the issues regarding accounting irregularities surfaced.

Marsalek was the officer in charge of overseeing Southeast Asian operations.

BDO is leading the banking sector in terms of assets and capital base, which amount to P3.29 trillion and P372.22 billion, respectively, as of end-March. In the same period, BPI’s total assets reached P2.19 trillion, while its capital account stood at P276.13 billion.

In the first quarter, BDO reported that its net earnings declined by 10.20 percent to P8.8 billion, while BPI saw its profits dip by 5 percent to P6.39 billion amid the pandemic.

Shares in BDO surged 4.26 percent on Tuesday to finish at P98, while BPI saw its stocks increase by 3.6 percent to end at P72 amid the 1.68-percent uptick for the benchmark index.

Death threats

Justice Secretary Menardo Guevarra on Tuesday disclosed that lawyer Mark Tolentino has been receiving death threats after his name was dragged into the scandal.

Guevarra said Tolentino and his lawyer Dennis Manalo went to the NBI on Monday to shed light on his alleged role on the issue.

“Attorney Tolentino said he was hired by his principal early this year to provide consultancy services, he undertook to submit a formal affidavit to the NBI. He said he is receiving death threats,” Guevarra told reporters on Tuesday.

The NBI is under the direct supervision of the DOJ.

Tolentino is a former assistant secretary for the Department of Transportation who was sacked by President Duterte in 2018.

He is being linked to the scandal following admission that his law firm, M.K. Tolentino Law & Business Consultancy Office, has foreign currency deposit accounts with BDO and BPI but that it did not name its clients, citing absolute confidentiality required by the Foreign Currency Deposit Act.

Tolentino’s camp denied knowing or participating “in any alleged irregularity” involving Wirecard’s money.

But, BSP Governor Benjamin Diokno claimed that those behind the anomaly are only using the names of BPI and BDO to cover their tracks as initial reports showed none of the missing $2.1 billion entered the Philippine financial system.

Guevarra earlier directed the NBI to investigate certain individuals who have been linked in the scandal.

He also reported that Wirecard’s COO Marsalek was in the country on March 3, 2020, and left after two days based on the records of the Bureau of Immigration.

Marsalek, who was in charge of overseeing daily operations of the company in Southeast Asia, has reportedly been fired from his position and is being blamed for the financial mess.

Guevarra  also ordered the NBI to coordinate with the AMLC despite BSP’s earlier pronouncement that the missing money of Wirecard did not enter the Philippines.

He said the NBI and AMLC would work together in looking into money-laundering indications involving the missing Wirecard funds.

Image credits: AP/Matthias Schrader

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