Protect the small depositors

Many of us may be oblivious to this phenomenon of small rural banks going belly up leaving their depositors with absolutely nothing, not even the paltry PDIC coverage. According to Tarlac Rep. Jesli Lapus, most of these banks have lost their PDIC coverage even before they shutter their doors.

The PDIC routinely cuts off deposit insurance coverage once a bank fails to pay the premium, which is like getting the umbrella back at the first drop of rain. That should be the first sign of trouble but small depositors don't hear of that until it is too late.

Mandating PDIC to provide a permanent and continuing insurance coverage is one of the provisions of a proposed bill filed by the congressman from Tarlac. The primary purpose of Jesli's proposed legislation is to increase the PDIC coverage from P100,000 to P200,000. The increase will cover over 90 percent of all bank accounts, Jesli explains, at no increase in premiums on the part of the banks. Unfortunately, Jesli's bill has been pending at the House Committee on Banks and financial institutions for over 10 months.

A former president of the Land Bank, Jesli understands the workings of the commercial banking system well. PDIC has no reason to complain about the bill, he says, and in fact, it doesn't have any. Numerically, there are more small depositors but the fewer large depositors more than make up in terms of premiums paid to PDIC. The volume of covered deposits, now estimated at P2.3 trillion, should generate more than enough in premiums to cover the increased coverage.

We have to protect the faith of the people in our banking system, he declares. Unfortunately, there had been a number of rural bank failures that caught small depositors by surprise. Money intended for tuition or much needed hospitalization are lost forever because the collapsed rural bank also lost its PDIC coverage. As for those who are still covered, P100,000 per depositor that was set in 1992, is no longer adequate. The hundred thousand then is not the hundred thousand now.

I told him that maybe people should just learn to choose their banks more carefully. Deposit insurance sometimes makes them careless in selecting their bank. But then again, the mere fact that a bank is licensed to do business by the BSP should be sufficient assurance that it can be trusted unless the BSP is being remiss on its duties.

Jesli says the House passed his proposed bill in the last Congress but that the Senate failed to act on it before adjournment. Right now, he cannot understand why Rep. Jaime Lopez of Manila who heads the Banking committee, refuses to call the bill for public hearing. Jesli has lost his patience and has delivered a privilege speech asking the House to discharge the banking committee as provided for in the House rules.

In fact, I understand that Congressman Lopez has not called a single meeting on any bill since Congress resumed session last month. Aside from the PDIC bill, more than two dozen other bills are waiting for consideration in the do-nothing banking committee. Among the bills pending include one regulating the pre-need industry, another proposing amendments to the usury law, insurance code, credit cards, and many others. A younger brother of former Manila Mayor Mel Lopez, the congressman apparently isn't as energetic as Mel.

The congressman from Tarlac laments that the inaction of the Jaime Lopez committee probably stems from the absence of lobbyists for the bill, even if the bill is an agreed priority bill by the LEDAC. "Poor people don't have lobbyists," Lapus observed. "But look at the fast track consideration of the special purpose asset vehicles bill favored by the big bankers."

I think they should study what is the optimum level of coverage possible so that all the small depositors are covered. Jesli's bill bringing up coverage to P200,000 is good but covers just about 90 percent. What will P300,000 cover? Actually, even a million pesos isn't that much these days. Unless our people feel safe with their bank deposits, it will be difficult to increase our savings rate to the point that makes a difference in supporting our economy's growth.

Kidnap for ransom

Speaking of pending bills in Congress, the official House of Representatives Internet website is currently running a poll with this question: Are you in favor of punishing the crime of kidnapping for ransom with amputation of upper and lower extremities?

Apparently, that is the proposal in House Bill 105. About 1,200 people have responded and the voting is close: 49 percent in favor; 48 percent against and three percent abstain.

We are wasting the taxpayer's money on silly things like this. Maybe they should just intensify honest-to-goodness police action and implement the death penalty by lethal injection. Add a hundred lashes if you will, but amputating the arms and legs is unthinkable.

From the House website, I also found out that they are finally considering a bill that will require the DFA to issue 10-year passports. This is one of our favorite proposals in this column because it makes sense. It is strange that I have a 10-year US visa but a five-year passport. When I travel, I have two expired passports attached to my valid one because my valid visas, not just of the US, are in the expired passports.

I am glad Congress is finally taking recognition of this problem. It is premature to praise them for this however, because chances are, they will run out of time to pass it into law.

Baby talk

Here's Dr. Ernie E. with something about Southwest Airlines, an efficient, always on time and low cost airline that made money when all the big ones were taking financial aid from the US Federal Government.

A mother and her son were flying Southwest Airlines from Kansas City to Chicago. The son, who had been looking out the window, turned to his mother and asked, "If big dogs have baby dogs and big cats have baby cats, why don’t big planes have baby planes?"

The mother, who couldn’t think of an answer, told her son to ask the stewardess.

So the boy asked the stewardess, "If big dogs have baby dogs and big cats have baby cats, why don’t big planes have baby planes?"

The stewardess responded, "Did your mother tell you to ask me?"

The boy admitted that this was the case.

"Well, then," she replied, "tell your mother that there are no baby planes because Southwest always pulls out on time. Your mother can explain THAT to you."

(Boo Chanco's e-mail address is [email protected])