Philippine Deposit Insurance Corp. (PDIC) has about P60 billion worth of acquired physical assets and receivables that it intends to turn into cash within the next five years.
PDIC president Valentin Araneta told reporters that selling its acquired assets and loan collectibles starting this year until 2016 was one of the state deposit insurer’s priorities.
PDIC takes over both the assets and liabilities of banks that are ordered closed by the Bangko Sentral ng Pilipinas. It also acquires certain assets of weak banks that cannot pay loans the deposit insurer extends as financial assistance.
Acquired assets are composed of physical properties and receivables, which are mostly in the form of loans extended by closed banks to corporate and individual borrowers.
Data from PDIC showed that of the P59.07 billion worth of assets it acquired, P44.34 billion represented receivables or loans extended by closed banks and existing banks that are indebted to PDIC. The balance represents physical properties.
Araneta said PDIC was bent on turning these assets into cash. He said selling the properties and collecting the loan receivables would help the state-owned firm boost its deposit insurance fund (DIF) and enable it to exceed 5 percent of total insured deposits in the country.
He said that as of end-May, the DIF—the pool of money that is tapped to pay claims of depositors of closed banks—settled at P74.89 billion. This was equivalent to 4.9 percent of total insured deposits in the country.
Araneta said the latest amount of DIF might be considered comfortable. PDIC wants to hit and then exceed the 5-percent threshold as soon as possible to ensure that public confidence in the country’s banking sector is maintained.
Regulators said the prompt payment of deposit insurance claims following bank closures was vital in avoiding public distrust in the banking sector.
In the meantime, he said proceeds from the planned sale of these assets would be used both in boosting the DIF and in paying creditors of troubled banks.
PDIC has recently taken over quite a number of failed banks, mostly rural banks.
In 2011, there were 25 rural banks ordered closed by the central bank and placed under PDIC’s receivership. Thrift bank Banco Filipino was also ordered closed last year.
So far this year, there are eight rural banks ordered closed. These include Export and Industry Bank, a commercial bank that used to be traded publicly.
PDIC, however, is not looking at selling EIB’s assets. It is, instead, looking for potential investors who will infuse new capital into and rehabilitate the bank.