Last Friday we tasked the Arroyo administration for a full-blown investigation of the closure of some eight rural banks belonging to the Legacy Group. These are the Rural Bank of Parañaque, the Rural Bank of Bais in Negros Oriental, the Pilipino rural Bank in Cebu, the Rural Bank of San Jose, Batangas, the Philippine Countryside Bank in Cebu, the Dynamic Bank of Calatagan, Batangas, the Nation Bank in Bacolod City and the Dynamic Bank also of Calatagan, Batangas.
As we said, these rural banks were placed under receivership by the Bangko Sentral ng Pilipinas (BSP) from Dec. 9 to 11th. If you ask me this is the first time ever that I can recall that some many rural banks went under within days apart. This alone should be enough reason to have this fully investigated. Before the Senate adjourned for their Christmas holiday, they vowed that they would investigate this incident.
It’s bad enough that the thousands of small depositors of these rural banks couldn’t get their money to spend for the Christmas season, which means they didn’t have a good Christmas at all! But we know that there is more to the sudden closure of the rural banks belonging to the Legacy Group and the principal suspect is criminal banking practices. Why was one company allowed to run so many rural banks is something we’d like to know!
We also learned that a Regional Trial Court (RTC) in Manila issued a Temporary Restraining Order (TRO) to stop regulators from the Bangko Sentral ng Pilipinas (BSP) from looking into the books of these rural banks. This was elevated and concurred by the Court of Appeals (CA) but the Supreme Court reversed the ruling. Hence when the word came out that these rural banks would eventually be examined, they immediately declared a bank holiday. What is sad here is that, even to the last day, the Legacy Group was still looking for investors or depositors.
Rumors are so strong in Cebu that these banks were allowed to operate because of political patronage. The names of well-known politicians allegedly supporting the Legacy Group allowed it to operate several rural banks. But now it has caused economic sabotage and the poor depositors are left with an empty bag. Of course, these small depositors can avail of the insurance by the Philippine Deposit Insurance Corp. (PDIC). But that’s only for those depositors with P250,000 or less. What about the bigger depositors?
In the meantime while Congress is still not in session, we’d like to hear from the Bangko Sentral ng Pilipinas (BSP) as to what happened with these rural banks and why they failed. Better still, what kind of regulations are they enacting to prevent the future collapse of other rural banks? I thought that with the lessons we learned from the ill-fated Orient Bank and then the 1997 Asian Financial Crisis, our banking practices were safe and sound? But with the failure of so many rural banks, we are fast losing our confidence with our banking system, unless the BSP comes out clean on this case.
While we’re still waiting for word from the BSP, last Sunday afternoon, I got a frantic text from a source in Manila that the Rural Bank of Subangdaku (RBS) in Cebu was going to declare an extended holiday. I had this story verified and indeed, it was confirmed that RBS would declare a holiday. Sure enough, early morning of Monday I drove to the RBS main branch in Subangdaku, Mandaue City and there was a notice posted on its closed doors declaring a Bank Holiday even if the Christmas holiday is over!
What’s disturbing here is that RBS is not part of the Legacy Group, it is owned by the family of Joseph Gaisano. What was even more ironic was that, I met some friends having breakfast early Monday morning and I gave them the news that RBS was folding up. Well, it turned out that one of my friends is a Director of RBS and it was the first time he knew of this!
You can speculate all you want as to why RBS went under despite being owned by the Gaisano family that runs a chain of stores nationwide. Cebu’s coffeehouses and the text brigades are steaming with rumours that this may have something to do with RBS president Paz Radaza, the wife of beleaguered Lapu-Lapu City Mayor Arturo Radaza.
I know that some Senators want to solve this problem by increasing the minimum that PDIC has to pay. But that doesn’t solve the problem of people posing as reputable bankers that are allowed to operate banks so they could swindle the poor and innocent depositors. We should have strict laws that punishes scammers. I still recall the ill-fated Philfinance Corp. whose officers fled to the US. Then there’s Orient Bank and so many more. How many more banks will collapse this year, we don’t know. It is time for BSP to put a stop to this nonsense and restore confidence with our banking system.
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For email responses to this article, write to vsbobita@mozcom.com. Bobit Avila’s columns can also be accessed through www.philstar.com. He also hosts a weekly talkshow entitled, “Straight from the Sky” shown every Monday only in Metro Cebu on Channel 15 on SkyCable at 8 in the evening.