The central bank on Friday padlocked three more rural banks affiliated with the Legacy group, using the leeway recently obtained from the Supreme Court in taking prompt action against insolvent banks.

Placed under receivership were Bank of East Asia based in Cebu City, First Interstate Bank based in Tacloban City, and Philippine Countryside Rural Bank based in Cebu City.

Earlier this week, four other banks of Legacy group were placed under receivership of Philippine Deposit Insurance Corp. (PDIC): Rural Bank of Paranaque, in Parañaque City in Metro Manila; Rural Bank of Bais, in Negros Oriental province; Pilipino Rural Bank, in Cebu province; Rural Bank of San Jose, in Batangas province; and Rural Bank of Nueva Caceres, in Naga City in Camarines Sur province.

The central bank, Bangko Sentral ng Pilipinas (BSP), said in a statement that it had been monitoring these banks well before the global financial turmoil began, because of potentially unsafe and unsound banking practices.

The Legacy group had engaged the BSP in a legal battle that constrained the BSP 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, but on Nov. 24 the Supreme Court issued a temporary restraining order against implementation of decisions of the Court of Appeals and the Regional Trial Court of Manila, paving the way for the BSP to take action against problematic banks.

The BSP reiterated that the closed banks represented a tiny fraction of the banking system and that the Philippine banking system remained stable, highly capitalized and highly liquid.

In a separate statement, the Chamber of Thrift Banks supported the BSP decision to padlock problematic banks and disclose which had voluntarily suspended operations. Edited by INQUIRER.net