The central bank, Bangko Sentral ng Pilipinas (BSP), has issued new guidelines in determining whether a bank is engaging in unsafe and unsound practices that could lead to bankruptcy.

The BSP issued the guidelines following the closure of several rural banks, which were placed last month under receivership of the Philippine Deposit Insurance Corp. (PDIC).

Under BSP Circular 640, banks offering deposit interest rates 50 percent higher than the comparable market rate will be considered as engaging in unsafe and unsound banking practice.

Unauthorized acceptance and solicitation of deposits outside bank premises and branches will also be considered as cause for alarm.

Other activities that may be considered unsafe and unsound are:

? Offering of incentives to potential depositors with an amount not commensurate with the worth of deposit

? Having a client base composed mostly of people with bad credit history

? Investing in real estate beyond prescribed levels

? Having high incidence of spurious or fraudulent loans.

Banks determined to be engaging in one or more of these questionable practices shall initially be warned by the BSP to rectify their practices.

Failure of banks to comply with the rules may lead to a cease-and-desist order by the central bank.

Since late last year, 15 rural banks, mostly units of the Legacy Group, have been shut down and placed under receivership after failure to fully service withdrawals.

PDIC said it would spend over P14 billion to service claims of depositors of the failed rural banks.

The state insurer said it would prioritize small depositors, meaning those with a maximum of P100,000 in deposits.

PDIC announced Thursday it had chosen the auditing and consulting firm of KPMG Manabat Sanagustin & Co. to assist in the examination of deposit claims.

It said that by outsourcing the examination of the claims, it could start paying depositors of 12 rural banks of the Legacy Group by the second week of February. With editing by INQUIRER.net