MANILA, Philippines--The owners of the Rural Bank of Subangdaku Inc. said P1.2 billion worth of loans representing 85 percent of the bank’s P1.4-billion asset base were either fictitious or granted by management without proper approvals.

This caused the bank to become not only illiquid but also insolvent, prompting the Bangko Sentral ng Pilipinas (BSP) to close it and place it under receivership with the Philippine Deposit Insurance Corp. (PDIC).

In an interview over the weekend, bank chairman Peter S. Gaisano said at least three of RB Subangdaku’s branches around the Visayas were either adjacent to or across the street from branches of Legacy Groupís rural banks.

“We were affected because depositors were afraid,” he said. “But we want to stress that we are not part of Legacy.”

The bank’s board of directors has accepted the resignation of its president Paz C. Radaza “for health reasons,” Gaisano said.

Radaza was, until last year, president of the Rural Bankers Association of the Philippines (RBAP), and is the wife of incumbent Lapu-Lapu City Mayor Arturo O. Radaza.

Gaisano said they are cooperating with regulators to ascertain the true state of the bank’s finances and to determine whether there was any malfeasance on the part of management.

The bank has been having problems servicing its clients since mid-December. It declared a voluntary bank holiday last Jan. 5.

The dismal state of the bank’s finances due to “unauthorized loans” was confirmed by external auditor RS Bernaldo & Associates, which was hired by the owners to examine its books.

RB Subangdaku is the latest rural bank to be padlocked after 13 Legacy Group-linked institutions closed by regulators in late 2008 and two Pampanga-based rural banks last week.

Related websites:
BSP
www.bsp.gov.ph