BSP, PDIC may ditch technical receivership for closed rural banks

BSP, PDIC may ditch technical receivership for closed rural banks

By LEE C. CHIPONGIAN

The central bank and the Philippine Deposit Insurance Corp. (PDIC) are considering the cancellation of placing expired rural banks under a technical receivership.

Banks threatened by bankruptcy are placed under receivership with the PDIC to avoid liquidation.

The Bangko Sentral ng Pilipinas (BSP) has considered “abandonment” of the alternative options of placing expired rural banks under technical receivership after PDIC argued against it due to legal concerns.

The proposal to discard technical receivership has been with the Monetary Board since November last year.

PDIC, in said proposal, raised legal issues on its own authority to implement technical receivership. As receiver and liquidator, PDIC is mandated to gather and take charge of all the assets and liabilities of closed banks and convert their assets to money for disposal to creditors.

PDIC President Jose A. Nograles has been very vocal about the immediate liquidation of closed banks since these banks have already undergone rehabilitation process under the BSP’s prompt corrective action (PCA), which failed, hence the receivership order.

Based on its charter, PDIC extends financial assistance to banks in order to protect the interest of depositors but the assistance is granted only if there is a viable rehabilitation plan, including capital recovery.

Nograles said earlier of the 81 banks ordered closed by the Monetary Board from 2005 to September 2009, 27 applied for rehabilitation but none were found to be viable for rehabilitation.

He argued that the outright liquidation of closed banks will “save the PDIC, the banking industry, and the depositors precious time.”

Under the present system, a bank found in early stages of distress and non-compliance with standard conditions and ratings is placed under PCA. When all options have failed, the bank is ordered closed by the BSP’s monetary body.

But, PDIC may still accept rehabilitation proposals during the 90-day receivership period, most of which come from previous owners and stockholders of the closed banks, said Norgales.

Based on audited statements, PDIC in 2008 reported a loss of 6.7 percent with an income of P6.52 billion.

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