PDIC pushes passage of bank liquidation law

MANILA, Philippines - State-run Philippine Deposit Insurance Corp. (PDIC) is pushing for the enactment of a law that would govern the takeover, liquidation and winding up operations of banks that are closed by the Bangko Sentral ng Pilipinas (BSP).

PDIC president Valentin Araneta said in an interview with reporters that the proposed Closed Bank Liquidation Act (CBLA) would serve as a comprehensive law to hasten the liquidation of closed banks through the seamless transition from bank closure to liquidation.

 “Our legislative agenda includes the proposed CBLA which will greatly smoothen the transition from a live bank in distress to a closed bank and minimize the disruption to the system,” Araneta stressed.

He pointed out that the proposed law that would govern the liquidation of closed banks has been presented to the Senate and House of Representatives.

The agency’s Legal Affairs Sector vigorously pursued legal action to recover and collect the receivables of closed banks and at the same time vigorously prosecuted legally liable erring closed bank officers and principals.

The PDIC official said Sen. Edgardo Angara and Albay Rep. Al Francis Bichara are looking at sponsoring the proposed billion.

Last year alone, 29 banks were closed by the BSP with a total of P26.4 billion of deposits outstanding accounted for by over 290,000 bank accounts of which nearly P13 billion were insured.

He said the total deposits of the closed banks were equal to 1.6 percent of the total national budget for 2011.

 “Our concern here is not only for the insured deposits but for all the deposits because of the disruption that the closures inflict on our banking system and the destruction it causes on the value and the savings of depositors, as well as the costs to the insurance fund,” he lamented.

In 2008, the Legacy Group was ordered closed by the BSP, affecting P14 billion worth of deposits of which over P11.7 billion has been settled by PDIC.

Araneta said other legislative issues being pursued by PDIC include the institutionalization of the required Deposit Insurance Fund (DIF) and for more flexibility for the board to determine the DIF requirements.

The DIF serves as the funds backing up the insured deposits of the banking system. It is invested in Philippine government securities and government guaranteed instruments prescribed in the PDIC charter.

The agency’s deposit insurance fund posted a double-digit growth of 10.3 percent to P74.89 billion or 4.9 percent of the country’s total insured deposits as of end-May from P67.89 billion or 4.8 percent of the total insured deposits in end-May last year.