Banco de Oro Universal Bank provides a - Asianbanks.net

72 BANCO DE OROAs part of the MOA, a special purpose entity is created to acquire the non-performing assets (loans and real and other propertiesacquired) of UOBP (excluded in the net assets acquired by the Bank above). Accordingly, on November 21, 2005, Onshore, a whollyownedsubsidiary of the Bank, was incorporated to acquire and subsequently dispose of the non-performing assets of UOBP (see Note14). To effect the acquisition of Onshore of the non-performing assets of UOBP, the Bank and UOBL provided a loan to Onshoreamounting to P4,822,598 and P3,955,845, respectively. Moreover, UOBL guaranteed to compensate any losses incurred by Onshoreincluding the satisfaction of Bank’s loan to Onshore.Also as part of the MOA, the Bank received financial assistance from Philippine Deposit Insurance Corporation (PDIC) amounting toP4,420,000 (see Note 16). The financial assistance which is recorded as part of Bills Payable in the 2005 statement of condition will matureon December 19, 2012 and bears annual interest rate of 3.90%. The related interest expense amounted to P6,225 in 2005 is shown aspart of Interest Expense in the 2005 consolidated statement of income. As of December 31, 2005, the proceeds of the financial assistancefrom PDIC are invested in government securities as provided for in the MOA.23.2 BDO Private BankOn July 14, 2003, the Bank acquired 100% of the shares of stock of Banco Santander Philippines, Inc. (BSPI) from Santander CentralHispano, S.A. (BSCH) and certain minority shareholders at P2,579,460 representing BSPI’s adjusted net book value as of July 31, 2003. Thetotal assets and total liabilities of BDO Private Bank as of July 31, 2003 amounted to P5,038,599 and P2,459,139, respectively.Simultaneous with the acquisition, the Bank executed an Escrow Agreement with BSCH whereby 10% of the purchase price and 10% ofBSPI’s shares were held by an escrow agent to be acquired by the Bank on a date mutually agreed upon by and between the Bank andBSCH which shall not exceed a period of nine months from the first closing date.The amount and the 10% BSPI shares were subsequently released from escrow on February 26, 2004.The change in the name of BSPI to BDO Private Bank was approved by the SEC on February 27, 2004.23.3 First e-BankIn a Memorandum of Agreement (MOA) dated October 22, 2002, the Bank assumed the deposit and other liabilities of First e-BankCorporation (1st e-Bank), up to a maximum of P10,000,000 effective October 23, 2002. The breakdown of these liabilities follows:Deposit liabilities P 9,010,000Bills payable 203,000Overnight clearing line 779,000Other liabilities 8,000P 10,000,000In consideration for the assumption of 1st e-Bank’s deposit and other liabilities, the Bank received from the former P10,000,000 inOctober 2002; of this amount, P2,931,054 and P2,931,400 remains in escrow as of December 31, 2005 and 2004, respectively, pendingcompliance by the Bank with certain terms and conditions as stipulated in the MOA (see Note 14).24. RELATED PARTY TRANSACTIONSIn the ordinary course of business, the Group has loan, deposits and other transactions with its related parties and with certain DOSRI.a. Under existing policies of the Group, these loans are made on substantially the same terms as loans granted to other individuals andbusinesses of comparable risks. The General Banking Act and BSP regulations limit the amount of the loans granted by a Group to asingle borrower to 25% of capital funds. The amount of individual loans to DOSRI, of which 70% must be secured, should not exceedthe amount of the deposit and book value of their investment in the Group. In the aggregate, loans to DOSRI generally should notexceed the total capital funds or 15% of the total loan portfolio of the Group, whichever is lower.The following additional information are presented relative to the DOSRI loans:ConsolidatedParent2005 2004 2005 2004Total outstanding DOSRI loans P 7,200,342 P 7,748,643 P 7,179,460 P 7,721,419Unsecured DOSRI loans P 20,846 P 39,004 P 20,256 P 38,133% to total loan portfolio 8.69% 12.13% 8.39% 12.19%% of unsecured DOSRI loans tototal DOSRI loans 0.29% 0.5% 0.28% 0.5%In the parent company financial statements, the Bank extended a single purpose accommodation of P4,822,598 to Onshore as arequisite to completing its acquisition of the sixty-six (66) branches of UOBP and their corresponding deposit liabilities. The Banksubmitted to the BSP its Memorandum of Agreement dated May 6, 2005 with UOBP and UOBL covering said branch networkacquisition, including exemption of the aforesaid accommodation from the Bank’s DOSRI limits.