REGULATORS are looking at filing cases against officials of LBC
Development Bank, which was discovered to have channeled funds to its
affiliate logistics firm.
"Examination findings on LBC [have been] forwarded to our Office of
Special Investigation for the determination of cases to be filed against
its responsible officers for violations of DOSRI and banking laws and
for unsafe banking practices," Juan C. de Zuñiga, Jr. deputy governor
and general counsel of the Bangko Sentral ng Pilipinas (BSP), said in a
text message yesterday.
"For the alleged diversion of bank funds to related companies, these
would constitute fraud against the bank for which the cases should be
initiated by PDIC for recovery and criminal violations," he added
DOSRI refers to loans extended to directors, officers, stockholders and
related interests.
"We or the BSP can file cases. We will look at [the bank's] financial
conditions," Cristina Q. Orbeta, executive vice president at the
receivership and liquidation sector at the Philippine Deposit Insurance
Corp. (PDIC), said in a telephone interview yesterday.
"[The examination] is part of the turnover of [LBC's] records. We will
analyze where the money went," she added.
PDIC took over the bank on Monday after it was closed by the central
bank through a Monetary Board resolution on Friday.
On Tuesday, BSP Deputy Governor Nestor A. Espenilla, Jr. told reporters
the bank had made cash advances in the billions of pesos to sister firm
LBC Express, Inc.
LBC Express, which is engaged in the remittance business, allegedly used
the advances to pay out the remittances to recipients. But the bank did
not get reimbursed.
LBC Development Bank also paid an interest rate on time deposits that
was way above the market average -- an unsound and unsafe banking
practice according to BSP rules.
As a result of the bank's closure, one of LBC Express's remittance
product was affected, said Santiago G. Araneta, LBC Express president,
told BusinessWorld.
"Only one remittance product out of many has been temporarily affected,
that being the ATM Bilis card," he said in a text message.
This service allows recipients of remittances to withdraw the cash from
more than 7,000 Megalink, Bancnet and Expressnet automated teller
machines (ATMs) nationwide.
"This matter is already being properly addressed, and pending ATM Bilis
transactions have been released since Sunday," Mr. Araneta said.
He admitted there have been inquiries on the relationship between LBC
Development Bank and LBC Express, and stressed that the latter's
operations "remain normal and steady."
He chose not to comment on possible cases that may be filed against the
bank's officials. "Due to the bank's state of receivership, only the
PDIC at this point can issue statements as regards the banks and the
proceedings," he said.
PDIC said LBC Development Bank had 321,516 deposit accounts as of June
30, of which 99% was fully covered by the P500,000 deposit insurance.
Ms. Orbeta said payment of deposit insurance to the bank's depositors
may start after 45 days, with the count starting on Monday.
"The usual timeline before we start paying out is 45 days. If the
records are clear, it can happen earlier," she said.
PDIC has begun forums for depositors and is working on getting the
bank's records.
"Hopefully in the next two weeks, we can assess the state of records so
we can determine how long it will take to validate deposits," Ms. Orbeta
said.
Mr. Espenilla, in a text message yesterday, said "PDIC will have to
determine whether [LBC Development Bank] still can be rehabilitated.
If not, it will be liquidated and net proceeds [will be] distributed to
creditors."
LBC Development Bank was the banking arm of the LBC Group of businessman
Carlos R. Araneta.
The LBC Group of Companies started as courier firm Luzon Brokerage Corp.
in the 1950s. In 1995, LBC Development Corp. acquired Banco Real
Development Bank, which became LBC Development Bank
The bank's balance sheet as of December 2010 -- available on the BSP Web
site -- showed it had a 27.29% nonperforming loan ratio and a meager
0.47% return on equity. Its deposits summed up to P5.6 billion then,
while loans and receivables totaled P1 billion. -- Neil Jerome C. Morales
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