MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) has denied the P14-billion loan request of the Philippine Deposit Insurance Corp., saying that the Deposit insurance fund (DIF) was robust enough.
BSP sources told reporters over the weekend that the loan application was not approved by the Monetary Board after deciding that PDIC’s DIF was sufficient.
Under the rules, PDIC is allowed to ask the BSP for a loan to beef up its DIF. But it is also allowed to issue its own debt instrument to raise the same amount from the commercial market.
“The DIF is more than enough to cover the currently pending deposit insurance claim,” the BSP source said. “Moreover, not all that P14-billion claim will be validated.”
PDIC president Jose Nograles said they decided to borrow from the BSP because it expected to spend P14 billion to pay the deposit insurance claims of some 135000 depositors of 12 rural banks that were shut down by the BSP.
But according to an MB source, all banks pay insurance premium to the PDIC precisely for the purpose of ensuring that their depositors would be paid off in case of bank failure.
“That means the PDIC has funds precisely for this purpose, they can use that fund because that’s what it is for,” the MB source said.
The MB source said the BSP itself was still waiting for the National Government to complete its own recapitalization plan amounting to P40 billion as prescribed under the BSP charter.
Because PDIC’s DIF is still substantial, the source said PDIC could easily draw from its fund and pay the deposit insurance claims right away without difficulty or seriously depleting its DIF.
Nograles said as much earlier, saying that it would not wait for the central bank to approve its P14-billion loan and start using its own funds to settle the claims of depositors caught up in the collapse of the rural banks.
At the recent congressional hearing on the collapse of the rural banks, Nograles told reporters that the PDIC has so far validated about 3,5000 small accounts that could be paid out of the DIF.
The PDIC estimates it would have to pay out around P14 billion worth of insured deposits below P250,000.
The BSP shut down 12 rural banks over the last two months as well as a group of banks under the so-called G7 group that were put under receivership early last year for unrelated problems.
Nograles said the PDIC’s request for a loan from the BSP is still pending but he said the company had more than enough to over the claims of the so-called Legacy Group depositors.
Nograles said the PDIC is now prioritizing depositors with accounts of less than P100000. He said the about 35,000 accounts were already examined and the payout of the clean and validated claims would start this week.
PDIC said there were over 130,000 deposit accounts involved in all 12 banks under the Legacy Group and 62 percent of these accounts were deposit accounts with P100,000 and below.
Testifying before the House committee on banks, Nograles also asked lawmakers to grant the PDIC the authority to issue its own commercial papers with a sovereign guarantee to give it access to cheap funds.
“We can always borrow from the BSP if it would make good business sense to do so, but of course it would be good if we had more options,” Nograles said.
He said the PDIC is not in dire need of the loan from the BSP but the PDIC board decided to request for the loan as a “prudent measure” toward protecting its DIF.
Central bank officials earlier said the depositors of the Legacy Group, in particular, no longer had hope of recovering their deposits and their only recourse was to file claims with PDIC.