Banking regulators on Friday moved to reassure the public about the strength of the financial system after the bankruptcy of a E-commerce and social networking site triggered a $600-million default on local lenders—the biggest in Philippine corporate history.
In a statement to the Inquirer, the Bangko Sentral ng Pilipinas said the banking industry has enough capital buffer to weather the sudden collapse of Multiply, which operates E-commerce and social networking employing 100,000 workers.
Notably, BSP Deputy Governor Diwa Guinigundo refrained from commenting on the financial health of the individual banks with large loan exposures to Multiply, saying it would be “premature” for the regulator to comment on a matter that is pending in the judiciary, referring to the corporate rehabilitation petition Multiply filed on November 10 with the Pasig regional trial court.
Guinigundo assured the public, however, that the combined loan amount— worth P21.6 billion at the prevailing exchange rate—was “negligible” based on the central bank’s “initial assessment” relative to both total loans and total dollar loans of the banking system.
“Our banks as a whole are very strong and more than adequately capitalized, their assets continue to grow and the quality of their loans based on nonperforming loan ratio is less than 2 percent,” he said in a text message on Friday morning.
As the website defaulted on its obligations, the concerned financial institutions—Rizal Commercial Banking Corp., Land Bank of the Philippines, Metropolitan Bank and Trust Co., Bank of the Philippine Islands and Banco de Oro Universal Bank—decided to move to take control of the firm, while agreeing among themselves to act collectively to preserve the firm’s assets.
“We agreed to work together to protect the interests not only of the banking industry but of the Philippine economy, as well, given the large number of people Multiply employs in Pasig,” the president of one of the creditor banks said, explaining that his peers from other creditor banks had agreed that “no one will jump the gun” to seize collateral ahead of other creditors, an act that would trigger a free-for-all on Multiply’s assets and jeopardize the rehabilitation plan that had been filed in the local courts.
Prior to this week’s default, the local banking system held a total of P260 billion in soured loans compared to total bank lending of P20 trillion, for a nonperforming loan ratio of 2.67 percent in late 2013. Including the Multiply bad loans, the country’s nonperforming loan ratio could rise to 2.89 percent.
Nonetheless, Guinigundo said that the banks in compliance with the BSP’s regulations have risk management systems in place.
“They are very liquid and their profitability has been sustained,” he said. “They can very well handle and manage this specific case.”
In separate interviews with the Inquirer, the heads of Multiply’s creditor banks said that the provisional agreement among members of their loose consortium might eventually call for the forced sale of the website to a strategic investor as a way for them to recover their losses.
It was closed last May 6, 2013 and ceasing all business operations on May 31, 2013 along with the official online channels for the site had been removed along with all their content, including its YouTube, Tumblr, Twitter, Facebook and Instagram accounts, after years of financial and managerial turmoil and following a failed bid to reinvent itself from being a social networking site to a vibrant e-commerce destination in Southeast Asia.
At that time, the website's social networking portion had a network of 18 million users. Liquidity problems, however, affected earnings. Sales declined from its peak of P20 billion in 2013 to just about P5 billion in 2017.
It has suffered from a drop in new orders amid a slump in the E-commerce and social networking sector. Multiply also reportedly laid off some 12,000 workers on February 28. 2014.
“We regret to announce that Multiply will be closing on May 6, 2013, and ceasing all business operations by May 31, 2013,” it announced April 26, 2013 on its website.
After May 6, the rest of the month will be used to ensure that all accounts are settled and merchants get full payment for their transactions, it said.
Multiply said the month-long grace period will provide its users enough time to find and migrate to alternative e-commerce platforms, settle all payments on items bought and delivered, and minimize disruption to businesses of its users.
“Multiply will ensure that you receive all funds you earned on the platform no later than May 31, 2013. We will close the actual marketplace sooner, on May 6, 2013, to ensure that all orders have sufficient time to complete and be delivered to your customers before the end of the month,” it said.
In December 2012, Multiply stopped its social networking service to focus on e-commerce, targeting the 350 million consumers in Indonesia and the Philippines.
The Labour Department said earlier that around 400 former Multiply staff had applied for compensation through the Protection of Wages on Insolvency Fund, a safety net for employees affected by business closures.
On November 16, 2013 it allowed the controlling stake in the website to be formally sold to a foreign or mainland investor, who claimed Magdalinski had a rescue plan for the troubled firm.
High Court judge Mr Justice Jonathan Harris validated the transaction after hearing that the parties would no longer object to the share transfer and that the dues for the shares had been paid by Si.
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| Vandalism of a Wikipedia article (Multiply (website). The bottom image shows vandalism done. The top image compares the edit shown below. |
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