Friday, December 23, 2011

BPI (Bank of the Philippine Islands) formerly Banco Espanol-Filipino: The Untold History

What is the untold history of BPI (Bank of the Philippine Islands) formerly known as Banco Espanol-Filipino?

First, let us have some background of BPI. Towards the end of this article, you will find out what is its secret history.

Bank of the Philippine Islands

From Wikipedia, the free encyclopedia
  (Redirected from Banco Español-Filipino de Isabel II)
Bank of the Philippine Islands
TypePublic (PSEBPI)
IndustryFinance and Insurance
FoundedManilaPhilippines (1851)
Key peopleJaime Augusto Zobel de Ayala II, Chairman
Dr. Patisha Zobel de Ayala, Chairman Emeritus
Aurelio R. Montinola III, President
ProductsFinancial Services
Net incomePHP 11.30 billion (US$ 259.77 million) (Dec 2010)
Total assetsPHP 878.15 billion (US$ 20.19 billion) (Dec 2010)/ Managed Funds = PHP 1.47 trillion (US$34.19 billion) (Sept. 2011)
Bank of the Philippine Islands (SpanishBanco de las Islas Filipinas, commonly known as BPIPSEBPI) is the oldest bank in the Philippines still in operation and is the country's third largest bank in terms of assets, the country's largest bank in terms of market capitalization, and the country's most profitable bank. It is owned by the Ayala Corporation - the largest conglomerate in the Philippines, and is based in Makati's Central Business District, on the corner of Ayala Avenue and Paseo de Roxas.
BPI is also the oldest bank in Southeast Asia and has a long and distinguished history that spans over a century. It has either influenced or has been influenced by many nations, including parts of the former Spanish Empire, especiallyMexico, and the United States. While it is considered by many as an old institution, BPI is trying to promote itself as a dynamic institution that caters to its various clients, which hail from various sectors of Philippine society.
BPI also pioneered rural banking in the Philippines, as its countryside banking operations preceded that of many other banks' rural banking operations by many years. Today, it maintains a large rural branch network, with some branches dating bank to the Spanish or American colonial periods. Its branch network of 831 branches is by far the largest branch network of any bank in the Philippines.
The bank has received several awards from various financial magazines, such as Euromoney the Far Eastern Economic ReviewThe BankerEuromoneyFinance Asia, and Global Finance . Its most recent award was from Asiamoney. In April 2010, which the bank was awarded as the Philippines' Strongest Bank. In 2009, the bank bags 10 awards as the Best Domestic Bank; Best Local Cash Management Bank in the Philippines as voted by Small-Sized Corporations; Best Local Cash Management Bank in the Philippines as voted by Medium-Sized Corporations; Best Local Cash Management Bank in the Philippines as voted by Large-Sized Corporations; Best Domestic Provider of FX Services in the Philippines as voted by Corporates; Best Domestic FX Provider of FX Prime Broking Services in the Philippines as voted by Corporates; Best Domestic FX Provider of Single-Bank Electronic Trading Platform.




BPI headquarters in Makati.
BPI was established on August 1, 1851 as the Banco Español- Filipina de Isabel II (Spanish-Filipino Bank of Isabel II), named after the queen ofSpainIsabella II, the daughter of former king Ferdinand VII. The bank was the second Philippine bank during the Spanish era after a bank was founded by Francisco Rodriguez, a Filipino Quaker based in London, in 1830. Today, Rodriguez's bank no longer exists.
The royal decree establishing the Banco Español-Filipino also gave it the power to print Philippine currency, the first time the Philippine peso was printed in the country (before 1851, a multitude of currencies were used, most notably the Mexican peso). They were originally called pesos fuertes(PF), or "strong pesos". First printed on May 1, 1852, they were reedemable at face value for gold or silver Mexican coins. The first deposit with the bank was also done on that day by a man named Fulgencio Barrera. Three days later, a Chinese man named Tadian became the first borrowing client of the bank after the bank discounted to him a promissory note amounting to ten thousand pesos fuertes.
On September 3, 1869, following a revolution which overthrew Isabella II, the name was changed to Banco Español-Filipino. In January 1892, the bank moved from the Royal Custom House in Intramuros to the new business district of Binondo, north of the Pasig River after it found out that Intramuros was becoming "economically inactive". It moved to 4 Plaza Cervantes, which was at that time a prime property owned by theDominican friars.
The first branch of Banco Español-Filipino outside Manila was opened in Iloilo on March 15, 1897. However, the idea to set up branches outside Manila was formulated as far back as the 1850s, with the first branch planned to be opened in Bacolor, the capital of Pampanga at the time. But by then, Iloilo and other provinces in Panay became more productive than Pampanga in the sugar industry, hence the move to open the first branch in Iloilo, which was then the Queen City of the South.
Following the cession of the Philippines to the United States following the signing of the 1898 Treaty of Paris, the bank changed from a Spanish institution to a Philippine one. On January 1, 1912, a decision by the shareholders of Banco Español-Filipino changed the name to the present Bank of the Philippine Islands (BPI), or Banco de las Islas Filipinas in Spanish. The basis for the name change was Act No. 1790, passed on October 12, 1907, which permitted the bank to change its name. The bank was also privatized during the American colonial period.
Following World War II, BPI was actively involved in the post-war reconstruction of the Philippines. In 1949, with the establishment of the Central Bank of the Philippines (now the Bangko Sentral ng Pilipinas), BPI (and other banks issuing Philippine currency) lost the right to issue Philippine pesos, a right it had since the Spanish colonial era and (with competition from other banks) during the American colonial period.
In 1969, Ayala Corporation, which had been affiliated with BPI since its establishment in 1851, became the dominant shareholder of BPI and eventually made BPI into the flagship of Ayala's financial entities.
Starting in the 1970s, BPI has been involved with many mergers and acquisitions. The first merger occurred in 1974 with BPI's acquisition of the People's Bank and Trust Company. Major notable acquisitions includeCitytrust Savings Bank, a unit of Citibank, in 1996 and Far East Bank and Trust Company on April 7, 2000. The merger with Far East Bank is arguably one of the largest in the Philippine banking history(The largest merger before that was the EBC-PCI Merger but since then surpassed by the BDO-EPCI Merger). In 2002 with the acquisition of DBS Bank Philippines, a subsidiary of DBS Bank. However, the BPI-DBS deal permitted DBS Bank to hold a stake in BPI. The latest acquisition occurred in 2005 with the acquisition of Prudential Bank.
In 1982, BPI became a universal bank, and in 2000, became the Philippines' first bancassurance firm, being the first Philippine bank to offer insurance services after acquiring the insurance companies of the Ayala Group, the parent company of the Ayala Corporation. Within that year, BPI also founded the BPI Direct Savings Bank, anInternet bank, which launched BPI into 21st century banking.
Today, BPI has maintained a leadership position in consumer banking, trust banking and asset management, corporate banking/corporate finance and bancassurance. BPI boasts of having the country's largest combined network of branches/kiosk units and ATMs: over 830 branches with over 1,700 ATMs. 20,000 point-of-sale terminals nationwide to support its delivery of services, with over 300 corresponding banks worldwide, with 11,925 employees servicing more than 3 million depositors. Its asset management division - BPI Asset Management, is the industry leader and country's largest in trust and investment management with over P490 billion (US$11.26 billion) in total assets under its asset management division alone as of December 2010. Total assets reached P877 billion (US$19.71 billion) as of December 2010. BPI managed total funds (deposits - [P720 billion] and trust assets - [P490 billion] combined as of December 2010) amounting to P1.21 trillion (US $27.82 billion), making it the country's second largest in the banking industry.
BPI was named as the Top Commercial Bank for OFW Remittances for the third year in a row and was elevated to the BSP Hall of Fame. This outstanding performance in the remittance services was replicated in 2008 as volume picked up by another 35.4%, well ahead of the industry growth rate.
Aided by the bank's risk management policies, BPI was the only major bank with no exposure to Lehman Brothers, AIG and the subprime mortgage industry. The bank also ably managed market risks by adhering to prudential Value at Risk (VAR) limits and reduced its trading books by 21%. Net 30-day non-performing loans ratio (BSP version) improved to 2.9%, and non-performing assets dropped below 10%.
In December 2008, BPI issued P5.0 billion (US$105.26 million) in 10-year subordinated debt eligible as Lower Tier 2 capital out of a BSP-approved P15.0 billion (US$315.79 million) issuance. The issue was well received and fully subscribed. Yearend capital was lower at P63.9 billion (US$1.35 billion), as actual dividend payments of P8.0 billion (US$168.42 million) exceeded the net income for the year and on lower market valuation of securities. Overall capital adequacy ratio of 14.1% remained sufficient and well above the 10% regulatory minimum.
BPI's market capitalization stood at P210.0bn (US$4.83 billion), the highest among the listed banks, notwithstanding the 24.9% drop in the stock price. The bank retained its CAMELS 4 rating in the annual BSP examination, and was assigned a National Long-term Rating of AAA(phl) rating by FitchRatings.
On December 8, 2010, BPI bagged a deal to take over the local fund management business of Dutch financial giant ING. That deal will turn the Ayala-led bank into an investment powerhouse. Making its first major acquisition since the buyout of Prudential Bank from the Santos family in 2005, the 159-year-old BPI will soon manage P78.4 billion in assets currently under ING Investment Management's care, making BPI the country's largest investment house. Under the terms of the agreement, BPI will acquire 100 percent of ING Bank Manila's trust assets. The acquisition is subject to certain conditions, including regulatory approvals.
BPI also maintains a specialized network of remittance centers for servicing overseas remittances from contract workers and other Filipinos working abroad. At present, BPI has remittance centers and desks located in Hong Kong, USA and Europe.
For years, international publications and rating agencies have given annual awards to BPI as one of the best banks in the region. Among these are the Far Eastern Economic Review, The Banker, Euromoney, Asiamoney, BusinessWeek, The Asset, Global Finance, Finance Asia, Alpha Southeast Asia, and The Asian Banker.
BPI has been consistently cited for its above-average profitability, sufficient capital/assets, low-cost funding base and manageable non-performing loan levels. Fitch Ratings noted that BPI has a comprehensive risk management which is superior to that of its peer banks, and this serves as an important element in keeping BPI better positioned in Philippine banking in the years ahead.


Here are some of my recent findings, not as a professional historian, but as a curious individual.

These findings are based on commercial and legal documents whose original purposes were for documentation as required by law and contracts.

Yet, such documents are a very important source of history.

After all, history is sourced from documents, not the other way around.

Now, let us proceed to the untold history.

Here is what history books do not tell us. This origin is taken from a document. Remember, documents were not written for history. There were encoded and entered as transactions in the ordinary course of business on a day to day basis. Unlike history, documents do not make up angles or perspectives or interpretations.

One document, a certificate of land title, numbered OCT-01-4 which was created formally in 1764 (yes, it's that old), was preserved, and re-constituted, and re-created and re-registered whenever the land registration laws changed over the years, contains certain annotations at the back.

One such annotation is relevant to:

Treaty of Paris December 10, 1898 and Banco Espanol-Filipino (now known as Bank of hte Philippine Islands or BPI)

The annotation is dated Feb 7, 1898 with annotation number EDC-073  s-2-6-1898 signed by 
FERMIN JAUDENES Y ALVAREZ, Ad Interim Governor General Royal Crown of Spain

Secured by this Title, OCT No. T-01-4, Hacienda Mabiga embracing the whole Province of Pampanga, Kuliat, the whole of Bamban and Capaz, Tarlac has mortgage to the Banco Español-Filipino, the sum of U.S. Dollar 20,000,000.00. to undertake the payment of secession treaty between Spain and American for the ceding of the archipelago by the Spanish Government to the American Government be eventually reverted to the real land owner, Don Esteban Benitez Tallano.
Date of Document : February 2,1898
Ad Interim Governor General Royal Crown of Spain
February 7, 1898

What does the above transactional annotation document in the land title OCT-01-4 tell us?

It tells us what history books have failed to capture.

1. A parcel of land referred to a Hacienda Mabiga had been mortgaged.

2. Hacienda Mabiga is secured by title OCT No. T-01-4.

3. Hacienda Mabiga embraces the whole Province of Pampanga, Kuliat, the whole of Bamban and Capaz, Tarlac.

4. Haciend Mabiga was mortgaged to Banco Espanol-Filipino (now known as Bank of the Philippine Islands or BPI).

5. The principal loan amount was US$20 million.

6. The annotation specifically mentions the purpose of the loan:  to undertake the payment of secession treaty between Spain and American for the ceding of the archipelago by the Spanish Government to the American Government.

7. A specific condition was imposed: be eventually reverted to the real land owner, Don Esteban Benitez Tallano.

8. The mortgage document was dated February 2, 1898.

9.  The real owner is Don Esteban Benitez Tallano.

10. This title was OCT No. T-01-4.

11. The annotation was signed by FERMIN JAUDENES Y ALVAREZ, Ad Interim Governor General Royal Crown of Spain.

12. The United States did not use its own money.

13. The money came from private persons, specifically the OCT No. T-01-4 owned Don Esteban Benitez Tallano, the heir of Prince Lacan

14. The Spaniards knew before December 10, 1898 that the money was already available

15. The money came from Banco Espanol-Filipino (now known as Bank of the Philippine Islands or BPI).

16. The sitting Spanish Governor General himself signed the annotation, further ensuring Spain that the money is available.


As you have noticed, the annotations and the history accounts dovetail in agreement.

This is what the history books failed to capture, but in reality was documented not by a historian, but by an officer who was doing his work in the ordinary course of business on day to day basis.

And this is a validation, once again, of the existence, the validity, and the authenticity of Torrens Title OCT-01-4 issued in favor of

"Prince Lacan Acuña Tallano Tagean (formerly Tagean Clan), married with
Princess Rowena Ma. Elizabeth Overbeck Macleod of Austria,
the owner in Fee simple of certain lands, known as HACIENDA FILIPINA"

(email me to get a scanned copy of the title issued by the register of deeds)

Note: The early transcriptions were in Spanish but the government had its translated into English through the efforts of then Solicitor General Felix Makasiar under Pres. Diosdado Macapagal (who later become Chief Justice under Marcos). Therefore, the government itself has consistently recognized the validity and the authenticity of OCT 01-4.

History from original source documents! What a refreshing perspective!