Bank closures hit all-time high in 2008
P21.6-B deposits in 25 padlocked firms
By Doris Dumlao
Philippine Daily Inquirer
First Posted 20:29:00 01/11/2009
Filed Under: Banking, Economy and Business and Finance, World Financial Crisis
MANILA, Philippines--Bank closures reached an unprecedented high last year with the fall of a chain of rural banks believed to be affiliated with the bankrupt Legacy group, affecting P21.6 billion worth of customer deposits in a total of 25 padlocked banks.
Subject to verification, P18.3 billion or about 85 percent of the deposits held by these banks shut down by the Bangko Sentral ng Pilipinas and placed under receivership could be covered by the state-owned Philippine Deposit Insurance Corp., based on official government estimates.
The spate of bank closures in 2008, which banking regulators attributed more to mismanagement and unsound banking practices rather than a fallout of the US-centered global financial crisis, exceeded 17 bank failures in 2007 and 11 closures in 2006.
Thirteen of the padlocked lenders, mostly small rural banks, that were placed under the PDIC receivership before the long Christmas break were suspected to be affiliated with the ailing Legacy pre-need and investment group headed by Sto. Domingo (Albay) mayor and former housing official Celso delos Angeles. They had a combined deposit base of P15.9 billion, of which P14 billion could be covered by the PDIC.
PDIC president Jose Nograles said the deposit insurer could still end up with a net profit in 2008 despite the bank closures because bulk of the deposit payout following the wave of bank closures before Christmas would fall within 2009.
Five big auditing firms accredited by the BSP have said they want to assist the PDIC in examining deposit claims. The auditing firms have until Jan. 13 to submit a firm proposal to the PDIC and the latter will choose three as external auditors to speed up the settlement of insured deposit claims.
“We’re talking about 135,000 (deposit) accounts that we have to examine,” Nograles said.
Given the challenges arising from current global financial uncertainties, PDIC is seeking amendments to its charter to increase insurance coverage while strengthening its institutional capability as a co-regulator of the banking system.
Under the proposal, deposit insurance coverage will be raised to P500,000 per depositor (not per account) from the existing P250,000. Based on the Senate version, there will be an authority to further adjust coverage subject to approval of the President.
Based on the Senate recommendation, half of the cost of the P500,000 expanded coverage will be paid by PDIC and the balance will be shouldered by the national government but only for the first six years.
This proposed increase in deposits would cover 97.2 percent of total deposit accounts in the banking system, but only 31.7 percent of total amount of deposits.
Nograles said such a scheme would be a “preemptive” and “proportionate” response given that “nobody knows the breadth and depth of the crisis.”
Related websites:
PDIC
www.pdic.gov.ph
BSP
www.bsp.gov.ph
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