Supreme Court orders closure of 10 Legacy rural banks

MANILA, Philippines -Ten bankrupt rural banks belonging to the Legacy Group of Companies must be closed down, the Supreme Court (SC) has ruled.

The SC voided an order of a Manila court stopping the Bangko Sentral ng Pilipinas (BSP) from padlocking the banks for being undercapitalized.

Judge Nina Antonio-Valenzuela of Manila Regional Trial Court Branch 28 had interfered with the Monetary Board’s (MB) function, the SC said.

In upholding the BSP, the SC said the lower court prevented the MB from appointing a conservator or a receiver for the rural banks.

Valenzuela erred when she stopped the BSP from compelling the banks to infuse additional capital, the SC added.

The SC said the lower court prevented the BSP from acting on the reports of examination (ROE) that found several deficiencies in the books of the rural banks.

“The respondent banks have failed to show that they are entitled to copies of the ROEs,” read the SC decision.

The SC said contrary to the lower court’s findings, the BSP did not violate the rural banks’ right to due process when the Supervision and Examination Department submitted the ROEs to the MB before giving copies to the rural banks.

“They can point to no provision of law, no section in the procedures of the BSP that shows that the BSP is required to give them copies of the ROEs,” read the SC decision.

Covered by the SC ruling are: Rural Bank of Parañaque, Inc.; Rural Bank of San Jose (Batangas) Inc.; Rural Bank of Carmen (Cebu), Inc.; Pilipino Rural Bank, Inc; Philippine Countryside Rural Bank, Inc; Rural Bank of Calatagan, now Dynamic Rural Bank (Batangas); Rural Bank of DARBCI, Inc.; Rural Bank of Kananga Inc., now First Interstate Rural Bank (Leyte); Rural Bank of Bisayas Minglanilla (now Bank of East Asia); and San Pablo City Development Bank, Inc.

Except for San Pablo City Development Bank, BSP examiners found these banks to be undercapitalized during an audit done on July 31, 2007.

They were found to have an aggregate capital deficiency of P2.5 billion.

The banks all operate under the aegis of the Legacy Group, which is primarily involved in selling pre-need plans.