MANILA, Philippines—The Philippine Deposit Insurance Corp. has assured the LBC Development Bank’s depositors, many of whom are believed to be families of overseas Filipino workers, that they would be able to get back the remittances they placed as deposits in the failed bank.
In a statement, PDIC said all deposits covered by insurance and confirmed as valid would be paid immediately after the process of validation has been completed.
“PDIC assures the public, particularly depositors of the LBC Development Bank, that the corporation will pay all valid accounts and deposit insurance claims as soon as possible,” PDIC said in a statement.
In a press conference, PDIC Executive Vice President Cristina Orbeta said the LBC Development Bank had many OFW families as depositors given the bank’s tie-up with courier and remittance firm LBC Express.
She said the PDIC had the interest of OFW families and all depositors in mind.
PDIC will announce soon the schedules of depositors’ forums, where depositors will be oriented on the process of claiming deposit insurance. Such forums are normally held in the branches of a bank that has been ordered closed.
Last Thursday, the Monetary Board of the Bangko Sentral ng Pilipinas placed the LBC Development Bank, the financial services arm of the LBC Group, under receivership of PDIC.
Nestor Espenilla, BSP deputy governor for bank supervision, said the bank was placed under receivership because, for one, it had already turned insolvent. This means the liabilities of the bank have already exceeded its assets.
Espenilla also said LBC Development Bank had been engaged in unsafe and unsound banking practices including commitment of paying interest rate on deposits higher than the average commercial interest rate.
According to Orbeta, a bank that offers interest rates much higher than the average should elicit doubts from depositors about its sustainability.
“High return means high risk,” Orbeta reminded depositors. She urged depositors to inquire about rules on safe and sound banking practices and see if their banks have been compliant with those.
Espenilla said that prior to its closure, LBC Development Bank had been under the Prompt Corrective Action (PCA) program of the BSP. Still, it failed to improve its financial standing.
Banks placed under the PCA program are placed under stricter monitoring and are advised on how it can improve its financial standing and comply with the liquidity requirements of the BSP.
“LBC Bank had been under PCA, but it failed to improve to address concerns of the BSP,” Espenilla said.
LBC Bank had a head office in Makati City, and 19 branches nationwide. The bank had 321,516 depositors owning P6.09 billion worth of deposits.
PDIC said that of the deposits placed with LBC Development Bank, P3.73 billion is covered by insurance. Under the charter of PDIC, deposit account worth P500,000 or below is covered by insurance.
Orbeta said the failure of LBC Development Bank did not reflect the state of the country’s thrift banking sector in general. She said the case of LBC Development Bank was an exception rather than the rule.
“[LBC Development Ban] is just a small bank and is not expected to affect the health of the thrift banking industry. There are many other thrift banks in the country that are healthy,” Orbeta said.