Petitioner Vivas and his principals acquired the controlling interest in Rural Bank Faire, a bank whose corporate life has already expired. BSP authorized extending the banks’ corporate life and was later renamed to EuroCredit Community Bank (ECBI). Through a series of examinations conducted by the BSP, the findings bore that ECBI was illiquid, insolvent, and was performing transactions which are considered unsafe and unsound banking practices. Consequently ECBI was placed under receivership. Petitioner contends that the implementation of the questioned resolution was tainted with arbitrariness and bad faith, stressing that ECBI was placed under receivership without due and prior hearing in violation of his and the bank’s right to due process.
Whether or not ECBI was entitled to due and prior hearing before its being placed under receivership.
In the case of Bangko Sentral Ng Pilipinas Monetary Board v. Hon. Antonio-Valenzuela, the Court reiterated the doctrine of “close now, hear later,” stating that it was justified as a measure for the protection of the public interest. Thus:
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.
In Rural Bank of Buhi, Inc. v. Court of Appeals, the Court also wrote that
x x x due process does not necessarily require a prior hearing; a hearing or an opportunity to be heard may be subsequent to the closure. One can just imagine the dire consequences of a prior hearing: bank runs would be the order of the day, resulting in panic and hysteria. In the process, fortunes may be wiped out and disillusionment will run the gamut of the entire banking community.
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.