By the Bohol Standard Taxpayers will have to shoulder billions of pesos worth of deposit insurance payments should a set of rural banks across the country--
controlled by one man--close due to insolvency.
According to bank regulators, the total bill that the state-owned Philippine Deposit Insurance Corp. (PDIC) will have to foot should these rural banks cease to do business is "over P12 billion" as of the latest data available.
This insured amount represents more than a fourth of PDIC's capital base and will almost certainly cause the deposit insurer to seek the support of taxpayers' money from the Bangko Sentral ng Pilipinas (the Philippine central bank).
Court documents obtained by the Philippine Daily Inquirer identified these firms as Rural Bank of Parañaque Inc.; Rural Bank of San Jose (Batangas) Inc.; Rural Bank of Carmen (Cebu) Inc.; Pilipino Rural Bank Inc.; Philippine Countryside Rural Bank Inc.; Rural Bank of Calatagan (Batangas) Inc. (now Dynamic Rural Bank); Rural Bank of DARBCI Inc.; Rural Bank of Kananga (Leyte) Inc. (now First Interstate Rural Bank); Rural Bank of Bisayas Minglanilla (now Bank of East Asia); and San Pablo City Development Bank Inc.
Except for San Pablo City Development Bank, all were found by central bank examiners to be undercapitalized during their latest audit done on July 31, 2007. They were found to have a capital deficiency of P2.5 billion, ranging from P1.4 million for Dynamic Bank to P983.5 million for Rural Bank of Parañaque.
On Saturday, however, the Legacy group sent a statement saying that as of last June, its 10 affiliate banks have raised their combined capital to P1.95 billion from P250 million.
Legacy Consolidated Plans Inc. president Carol Hinola said the combined assets of the banks stood at P17.8 billion, consisting of P2.8 billion in cash and near-cash equivalent, P7.5 billion in loan receivables and P7.5 billion in acquired and other assets. She said the total liabilities of the banks, on the other hand, stood at P16 billion.
LEGACY GROUP
Who is Celso G. de los Angeles Jr.
At the center of the issue is businessman Celso G. de los Angeles Jr., who was barred by regulators from the banking industry in the mid-1980s for his alleged involvement in "unsound banking practices" that contributed to the failure of three rural banks.
De Los Angeles, now the mayor of Sto. Domingo, Albay, was the former chairman of the Legacy group, a financial services firm engaged in the pre-need business.
According to the company's lawyer, Binky Noel, De Los Angeles is a shareholder of Legacy and all 10 banks involved in the case. De Los Angeles' spokesperson, Mel Amado, insisted on Saturday that his client had divested from Legacy and the rural banks upon becoming a town mayor.
Most cases against De Los Angeles were dismissed after witnesses failed to appear in court and the central bank was left with little choice but to take him off its blacklist in 2003.
Last February 2007, BSP officials recommended that the undercapitalized rural banks be placed under receivership "to prevent the further dissipation of their assets," but this was set aside by the Monetary Board.
Soon after this, the banks, working as one, succeeded in obtaining a TRO from Judge Nina G. Antonio-Valenzuela of Branch 28 of the Manila Regional Trial Court. This prevented the BSP from acting on the findings of its examiners or even submitting reports to the Monetary Board--in effect, preventing the regulator from closing the insolvent banks.
The BSP then countered with a petition to the Court of Appeals, arguing that Judge Antonio-Valenzuela's TRO violated the banking regulator's "Close Now, Hear Later" doctrine, which is meant to protect the interests of the public through a speedy closure process, preventing bank owners and officials from dissipating the remaining assets.
BSP's petition is being heard by the Court of Appeals' 8th Division under Justice Bienvenido L. Reyes, with Justices Vicente Q. Roxas as senior member and Justice Apolinario D. Bruselas as ponente.
According to PDIC president Jose C. Nograles, the insurer is mandated to pay legitimate clients of closed banks from its deposit insurance fund regardless of the aggregate amount involved, as long as the individual accounts fall within the cap.
"PDIC is prepared to pay valid deposit claims up [to] P250,000 [per depositor] of banks that are closed by the BSP," he said.
In this case, however, the rural banks' insured deposit liabilities of P12 billion already amount to 27 percent of PDIC's P44.5-billion reserve. As in the past, it is likely that the BSP--and ultimately all taxpayers--will have to advance the cash to PDIC to fund these pay outs should these rural banks require help.(PDI)
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Topic: Pinoy Taxpayers Will Pay for Bankrupt Philippine Rural Banks (Read 1243 times)