Vivas on his Behalf and on Behalf of the Shareholders of Eurocredit Community Bank

v.
Monetary Board and PDIC
G.R. No. 191424
August 7, 2013

Facts:

Eurocredit Community Bank was registered as the Rural Bank of Faire prior to changing
its name and extending its corporate life as approved by the BSP after the latter’s corporate life
expired. During investigations conducted by the BSP, it discovered that the bank was incurring
substantial losses and was engaged in unsound and unsafe banking practices. Thus, after several
investigations and conferences, the BSP Monetary Board issued an order placing the bank under
receivership and liquidation based on the grounds enumerated under Sec. 30 of the New Central
Bank Act, and the inability of the management to restore the financial viability of the bank. Vivas,
in behalf of the bank contested the order alleging that the same was done in violation of the
bank’s right to due process, as the order was issued with no prior notice and hearing. Hence, this
petition.

Issue: Whether or not the Monetary Board may place a bank under receivership and/or
liquidation with no prior notice and hearing.

Ruling: Yes.

The MB, under R.A. No. 7653, has been invested with more power of closure and
placement of a bank under receivership for insolvency or illiquidity, or because the bank’s
continuance in business would probably result in the loss to depositors or creditors, which is
referred to as the Close Now Hear Later Doctrine. The "close now, hear later" doctrine has already
been justified as a measure for the protection of the public interest. Swift action is called for on
the part of the BSP when it finds that a bank is in dire straits. Unless adequate and determined
efforts are taken by the government against distressed and mismanaged banks, public faith in
the banking system is certain to deteriorate to the prejudice of the national economy itself, not
to mention the losses suffered by the bank depositors, creditors, and stockholders, who all
deserve the protection of the government. The doctrine is founded on practical and legal
considerations to obviate unwarranted dissipation of the bank’s assets and as a valid exercise of
police power to protect the depositors, creditors, stockholders, and the general public. Swift,
adequate and determined actions must be taken against financially distressed and mismanaged
banks by government agencies lest the public faith in the banking system deteriorate to the
prejudice of the national economy.