Concerns over LBC Bank raised anew

Stakeholders and depositors of the LBC Development Bank have raised concern over the non-compliance of the bank’s board of directors of a memorandum of agreement signed between the Bangko Sentral ng Pilipinas (BSP) and the bank instructing the bank directors and management "to adopt measures to address all identified weaknesss in risk management and internal control systems, among others.

The accord was a result of an examination undertaken by BSP examiners in 2002 after independent auditors refused to render an opinion on the bank’s financial statements.

Base on documents, Guzman Bocaling and Co., the auditor of the bank’s financial statements covering 2003 raised many "inaccuracies and inadequacies" forcing them not to issue an opinion. An independent auditor’s opinion is required by law on annual financial statements of corporations registered with the Securities and Exchange Commission (SEC) and the BSP.

The same auditor also could not express an opinon "due to the absence of complete supporting documents from the bank’s accounting records."

The financial statements for 1999 to 2001 were audited by Joaquin Cunanan which issued a disclaimer of opinion due to "inadequacy of accounting records."

The 2003 and 2002 financial statemnets were "unfinished" pending the compliance of the September 2003 memorandum of agreement by LBC Development Bank.

Documents revealed that the BSP wants the thrift bank "to address all identified weaknesses in risk management and internal control systems; immediate infusion of fresh capital to comply with the P325 million minimum capital requirement; reduce exposure to borrowers whose loan balances exceeded the single borrowers limit and DOSRI within the required ceilings; maintain adequate reserves against deposit liabilities at all times to avoid incurring penalties and prepare monthly reconciliation of head office and branches transactions and report to BSP items outstanding in the reconciliation for more than six months."

The earlier reviews of the bank indicate that there wre slight discrepancies in some income statement items compared to income reported in the Bureau of Internal Revenue (BIR) tax returns or community tax certificates.

The 2003 income statement shows a net loss for the year amounting to over P10 million. In 2002, the bank suffered a net loss of a little over P28 million.

Unaudited balance sheet likewise indicates deposit liabilities as the only significant liability with "other liabilities" as the one remainig liability item appearing.