The Philippine Deposit Insurance Corp., which spent nearly P4 billion last year on insurance claims, said it would scrutinize recent bank closures to determine if these involved fraud or unsound banking practices by owners, officers or employees.
According to PDIC general counsel Romeo Mendoza Jr., going after potential legal liabilities of owners, officers or employees of shuttered banks was one way to discourage malpractice in the banking sector.
Mendoza said there was a good chance some of the recent bank closures were caused by unscrupulous practices, such as stealing of deposits.
If, indeed, there was malpractice, he said PDIC would exhaust all legal means to discourage other people from committing the same crime.
“If a bank is robbed, the robbers could take away a few millions with a high risk of being caught. But if a bank closes down because of sophisticated yet fraudulent activities, losses could be in the billions. This is the reason why PDIC wants to strictly go after unscrupulous individuals accountable for bank closures,” Mendoza told the Inquirer.
He said waging legal battles against fraudulent activities in the banking sector complements the ongoing incentives program being offered by regulators to banks that will go through mergers or acquisitions.
The filing of cases against fraudulent individuals and granting of incentives for bank consolidation are strategies to prevent or at least minimize costly bank closures.
On mergers and acquisitions, PDIC believes that the takeover of financially weak banks by strong ones helps prevent the closure of the weaker banks.
This will in turn help PDIC reduce its cost of servicing insurance claims.
Last year, 24 banks, mostly rural banks, were ordered closed by the Bangko Sentral ng Pilipinas due to capitalization problems and insolvency.
The number was lower than the 29 registered in 2011, but regulators want cases of bank closures to be trimmed further.
Mendoza said that PDIC had so far filed over 100 cases of bank fraud.
These cases include those against officials and owners of the defunct Legacy-owned banks, Banco Filipino, and GMA Rural Bank.
In the case of Legacy banks, the owners and officers were accused of stealing deposits through various means, such as loans to fictitious borrowers.
In the case of Banco Filipino, owners and officers were accused of extending huge loans to favored entities and not collecting loan payments from them.
He said PDIC was keen on reviewing other cases of bank closures and filing more cases if irregularities would be determined.
“PDIC continues to pursue cases against errant bank owners, officers and employees in order to strengthen the deposit insurance coverage system, maintain faith and confidence in the country’s banking system and protect it from illegal schemes and machinations,” the deposit insurer said in a statement.