Seeking a common solution

Bangko Kabayan

Seeking a Common Solution

by Teresa and Francis Ganzon

The US sub-prime mess hardly created a ripple in the local banking industry. However, when a group of rural banks owned by the Legacy Group declared a bank holiday towards the end of December 2008, the rural banking sector, particularly where there were Legacy banks located, were severely affected.

The largely rural depositing public began questioning whether in fact, the rural banks they were patronizing were stable or would also close or go on bank holiday.

Bangko Kabayan has a 13-branch network in the province of Batangas, with about P1.2B in deposits, as of year-end 2008. We are a 52-year old institution and had enjoyed a good reputation in the communities we were present in.

Bangko Kabayan

However, there were two Legacy banks in our province, with branches in 3 of our locations. When they suddenly closed, panic ensured among the depositors, particularly in the town of San Jose, which is just the next town to Ibaan where our Head office is and which holds the biggest deposit among all our other branches. And even if we had tried to be prepared to meet abnormal levels of withdrawals which began in early January, we were still anxious and tense because panic is like a wildfire. It easily spreads, especially today when rumors fly fast aided by the texting phenomenon.

It did not help that in that town, a branch of a commercial bank opened and it seemed that the strategy of the new bank manager had been to attract the deposits of rural banks in the area by playing on the fears of the townspeople.

Day after day, we were monitoring the steadily decreasing deposits in our branch in San Jose. We began to notice that not only in San Jose were we suffering this decrease  but also in nearby branches.

As we had done in the past, we put this problem in common with our friends in the focolare, asking for their unity and prayers. We also met with our management corps so that we would move as one to counter the negative effects of the panic. Then we intensified our efforts to build up liquidity to meet the abnormal withdrawals. Our bank managers and senior officials were going out to visit big depositors and the community-based microfinance centers as well, to allay their fears and assure them of our stability – and here, we saw the fruits of years of relationships based on service and transparency as many assured us of their continuing support.

We also undertook PR campaigns, putting TVs in our lobbies that played video clips of the bank’s activities for the community and displayed the awards we had received through the years due to good governance and operations. We met with our bank employees, explaining to them our own standing so they would not fear the continuing withdrawals and be able to project confidence when answering depositor queries.

But the panic went on anyway. In a span of 2-3 weeks, we had lost about P100 million to withdrawals. Some depositors were half-apologetic about withdrawing but were pressured to transfer their savings by other relatives who did not know us well and were simply insisting on “playing safe”.

As we were thinking of facing the problem head on by seeking an audience with the local sanggunian and explaining our position to them, we discussed the idea of not only going as Bangko Kabayan but inviting the 3 other rural banks in the same town, to join us so we could make representations as an industry sector and not just as an individual rural bank. We knew they had also been suffering the effects of the panic and might welcome the chance to seek a solution based on cooperation.

But we were aware that acting together also had its risks. If any of the other banks with us indeed failed to manage their liquidity and end up also declaring a bank holiday, we would get further dragged down and would have even more serious problems. While we knew exactly where we stood regarding reserves, we were not as sure about the other banks.

Still at the end of the discussion, we knew that adhering to the EOC philosophy meant seeking solutions based on solidarity, looking after others similarly situated, even if they were our competitors, in the interest of the common good.

We had good relations with the other rural bankers in our province as I had served as federation president for a good number of years. Trust had been built between us and on many occasions, we had shared our own programs, experiences and advocacies with them during federation meetings.

Thus, when we contacted the current president of the federation about the plan, he was enthusiastic and supported it wholeheartedly, even if he himself did not have a branch in San Jose. I talked to each of the owners of the 3 other rural banks and they likewise welcomed the idea of coming together to face the mayor and other local officials, to seek their help in explaining to their constituents about the important role rural banks played in the life of the community.

We took on the responsibility of contacting the Bangko Sentral to ask for their support and they sent a senior official to be with us in this action. Having a daughter working with one of the TV networks, we were able to arrange for media coverage of the bankers addressing the sangguniang bayan. We also prepared a powerpoint to take the opportunity to explain what a function of a rural bank is in a community and the big help it could be. We were offering services big banks considered not worth their time and expense.

The meeting with the local officials went very well. We presented ourselves as a group and it was only in response to a specific question from one of the councilmen, that each of us had to state our individual statistics in terms of resources, deposits, etc. The mayor and councilors were convinced and assured us they would try and calm down the fears of their constituents.

After the presentation, we invited the group to our bank for lunch with the BSP official. The president of the federation was so happy about the effort that he proposed we go ahead with financial literacy programs that would help further educate the public about interest rates, savings and investments, etc. The relationship among the rural bankers were strengthened and even in the field, our managers desisted from taking advantage of smaller banks when they would be asked by their clients about the stability of competitors in the vicinity.

 We had barely calmed down when, four days after this dialogue with local govt. officials, we received word that the second biggest rural bank in the province was very close to declaring a bank holiday. And though the rest of us tried to help in their liquidity by placing deposits in that bank, it was not enough to cover their withdrawals. Things were simply beyond our control. We were all advised by no less than a high official of the BSP that we should all begin filing papers for emergency loans with them, to help deal with the resulting greater loss of confidence in the system.

We prayed again for divine intervention because we knew that after such a high profile action where we presented the industry sector as being stable, this development would result in such a backlash that would surely result in smaller rural banks heading for closure, if not our own.

We reminded ourselves that if BK was indeed an enterprise that belonged not to us but to God, He would surely look after it and nothing was impossible for Him.

Early the next morning, we again received news that during the late hours of the evening, a commercial bank had bought out this distressed bank and had put all its resources towards stemming the bank run that had weakened it. As one of our bank officers remarked “M’am, that’s Divine Providence, isn’t it?”

Within a two weeks, we began to see our balances stabilize and very slowly, the deposits began returning. At our lowest, we had suffered a decline of about P130M. More than half of this has returned in the 3-4 mos. following these incidents. Even before everything returned to normalcy, we treated the branch personnel to dinner, to thank them for their efforts and continued service in the face of the crisis that we had all encountered.

Today, we continue to operate in a challenging environment. But reminding ourselves that Bangko Kabayan has a calling of its own – and that is to mirror business as an instrument of unity and fraternity among all stakeholders, competitors included – keeps us focused on building and strengthening relationships and gives us the confidence to grow so that we may touch more people’s lives with our service.





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