10 rural banks close shop

MANILA, Philippines - Ten rural banks have been closed by the Bangko Sentral ng Pilipinas (BSP) as of June this year affecting some 42,000 accounts.

The rural banks are located in different regions, and not related to banks identified with the controversial Legacy Group.

According to the Philippine Deposit and Insurance Corp. (PDIC), majority of the reasons for the closure of these banks had to do with capital or the inability of these institutions to raise capital.

The closed rural banks had deposit accounts amounting to roughly P1.6 billion.

This is loose change when compared to the estimated P12 to P14 billion valuated to the thrift and rural banks associated to the Legacy group.

The 10 closed rural banks are: the Apex Rural Bank in Bulacan, the Rural Bank of Laoac of Pangasinan, the Rural Bank of Ivisan in Capiz, Eurocredit Community Bank of Cagayan, Bani Rural Bank of Pangasinan, BMS Rural Bank of Pasig, Rural Bank fo Ozamis City, Coop Bank of Camarines Sur, Coop Bank of Nueva Ecija, and the Rural Bank of Bangued in Abra.

PDIC president Jose C. Nograles lamented that banks placed under receivership, rehabilitation or closure ironically favor the former bank owners. But it is disadvantageous to the depositors and to government.

Nograles explained that present regulations gives distressed banks a 90-day “bank holiday” before it is taken over by the government. “By that time, nothing is left for the administrator but loose change and empty desks,” he added.

Small bank depositors lose their hard earned savings and business capital, while government will have to spend million of pesos to protect these depositors, and the former bank owners walk out the door for their “inefficiencies or failure to save the bank.”

PDIC is proposing a piece of legislation that will allow government to temporarily take over or be directly involved well before the bank goes into distress. That will allow government to assist its recovery, rehabilitation, sale or consolidation without impact to the depositors.

Prevention of closure is still the preferred mode, rather than closure.

Meanwhile, the Rural Bankers Association of the Philippines (RBAP) said that the consolidation of the country’s rural banking sector has been going on for the past three years.

In fact, the only trade organization of the country’s 680-strong rural banking sector wants to accelerate the process. They however believe that it cannot be achieved without the help of the regulators.

The RBAP claims that there are a maximum of eight banks that consolidate or merge every year. The PDIC, on the other hand, said that a little over 10 rural banks are placed under receivership every year.