Thursday, 15 September 2011 10:52
An official of the Bangko Sentral ng Pilipinas (BSP) said the country’s banking system remains strong despite the closure of 26 banks in the first nine months of this year.
BSP Deputy Governor Nestor Espenilla Jr. advised the public to carefully choose the banks where they will put their money and not be awestruck by the deposit interest rates that some banks offer.
“Depositors have the obligation to find out things about the banks where they want to place their money,” he said.
The BSP official stressed that the portion of erring banks in the country is very small and they have to be closed down to address their problems.
Last week, central bank’s policy-making Monetary Board (MB) ordered the closure of LBC Development Bank and placed this under the receivership of the Philippine Deposit Insurance Corporation (PDIC).
Espenilla said the Board’s decision was made following the finds that the thrift bank of the LBC Group of businessman Carlos Araneta is insolvent and involved in illegal banking practices.
He explained that the thrift bank became insolvent due to “excessive advances” amounting to billions extended to its sister company – LBC Express Inc., the remittance unit of the company.
"It was already insolvent and its operation was not sustainable. The bank did not comply with the cease and desist order issued by the Bangko Sentral,” he said.
The central bank executive also said that Makati-based LBC Development Bank is “engaged in unsafe and unsound banking practices."
He said the bank offered a 7.5 percent annual deposit interest rates, way above the rates offered by its competitors, which is as low as one percent.
Earlier, PDIC assured depositors of LBC Development Bank that all valid accounts with the bank will be paid.
It said the bank has an estimated total deposit liabilities of P6.09 billion as of last June and this “accounts for one tenth of one percent” of the country’s banking system.
The bank has 321,516 accounts and 99.4 percent of which are fully-covered by deposit insurance. It has insured deposits amounting to P3.73 billion.
PDIC allows for the automatic payment of accounts with balances of P10,000 and below if holders of these have complete addresses with the bank and without outstanding bank loans. Payments would be made through postal money orders (PMOs), which can also be encashed in branches of Land Bank of the Philippines (Landbank) nationwide.
PDIC said it will conduct a series of Depositors Forums (DF) in areas where the bank has braches and schedules of these “will be announced as soon as possible in the bank premises and in the PDIC website, www.pdic.gov.ph.”
“Again, we assure depositors that PDIC will pay deposit insurance for all valid accounts and claims,” it added. (PNA/PIA9-BST)
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