THE BANGKO Sentral ng Pilipinas has uncovered certain irregularities--such as the granting of loans without collateral and documentation or use of bank funds to pay for obligations of affiliated pre-need companies--in some of the padlocked banks affiliated with the Legacy group, a central bank report said.

The BSP last week shut down and placed under the PDIC's receivership seven more banks affiliated with the Legacy group, using the leeway recently obtained from the Supreme Court in taking prompt action against insolvent banks.

In some of the banks already placed under PDIC receivership, the BSP found circumstantial evidence that a large amount of questionable loans were granted to borrowers without collateral and without adequate documentation, the report showed.

"The loan documents were not properly filled out, the loan application forms had no approving authority portion, thus, the person or persons responsible for the grant cannot be ascertained, the addresses of the alleged borrowers were not stated, there were no credit investigation reports to support the financial capacity of the borrowers to serve as basis for the grant and most of all, the signatures appearing in the loan documents were doubtful," the report noted.

Among the companies which were identified as beneficiaries of the unsecured and unauthorized loans were Legacy Motors and One Card Co. Inc.

The BSP report also cited instances that bank funds were being used to pay for the obligations of pre-need companies identified or related to the Legacy group. But it was made to appear that the payments were granted by the bank as loans.

The report noted that the use of bank funds to pay for obligations of Legacy companies was a "clear case of estafa/misappropriation" punishable under the Revised Penal Code. But for banks already placed under PDIC receivership, the PDIC as liquidator or receiver was cited as the proper party to file the criminal complaints.

The seven Legacy-affiliated banks padlocked by the BSP last week were Bank of East Asia based in Cebu; First Interstate Bank in Tacloban; Philippine Countryside Rural Bank in Cebu; Rural Bank of Parañaque; Rural Bank of Bais (Negros Oriental); Pilipino Rural Bank (Cebu); Rural Bank of San Jose (Batangas), and Rural Bank of Nueva Caceres (Naga City).

"The Bangko Sentral has been monitoring these banks well before the global financial turmoil because of potentially unsafe and unsound banking practices," the central bank said in a statement.

The seven padlocked banks were part of a group that engaged the central bank in a legal battle that constrained the banking regulator from taking action based on the findings of deficiency submitted by its examiners. Earlier rulings by lower courts favored the banks' pleading for due process.