PDIC Calls For Quicker Liquidation
Removal Of 90-Day Receivership Period
By LEE C. CHIPONGIAN
June 27, 2012, 5:36pm
MANILA, Philippines --- The Philippine Deposit Insurance Corp. (PDIC) is
insisting on the removal of the 90-day receivership period in its
proposed Closed Bank Liquidation Act (CBLA) which would effectively
cancel the placing of expired banks under a technical receivership and
proceed directly to asset disposition.
Under existing charter and law of both the PDIC and the Bangko Sentral
ng Pilipinas (BSP), banks threatened by bankruptcy are placed under
receivership with the PDIC to basically, avoid liquidation. However
since 2010, the BSP and PDIC had been working on the cancellation of the
90-day receivership mandate. The debate centered on the issue that the
BSP's Prompt Corrective Action (PCA) framework has already processed
problematic banks and most have already undergone rehabilitation which
failed, hence the closures.
"The banks' rehabilitation should have happened already (with PCA),"
said PDIC President Valentin A. Araneta. "So what's going to happen
(with CBLA) is more clout for the regulator to force action before
closure and this serves everybody the best. (It would mean) a smooth
transition and it's not destructive to depositors, especially if you
have the bridge bank facility … It will be as if nothing happened."
"It's better for depositors to remove the 90-day receivership," Araneta
added.
This policy change is one of the important features of CBLA, which has
yet to take off in the Lower House and the Senate. Aside from the
removal of the 90-day receivership period, the proposed bill is also
pushing for the bridge banking as another form of liquidation and
increased authority for PDIC in the takeover, liquidation and "winding
up" of closed banks.
PDIC Executive Vice President Cristina Q. Orbeta, in charge of
receivership and liquidation, said they want to dispose of the assets
immediately once the bank is ordered closed by the BSP, and not to wait
for another three months to see it done.
Orbeta explained that the provision was in the law because before the
PCA, closed banks needed more time to sort out before liquidating assets
under receivership.
"The understanding before is they wanted to give time for the
stockholders (of closed banks) to address the problems but now, early on
there's already the PCA and when the bank has been closed, they have
already exhausted all the possibilities," said Orbeta. About 90 percent
of the time nothing more can be done for the closed bank, she added.
"(And) it's too costly to rehabilitate the bank and we cannot proceed
immediately to sell the banks' assets."
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 cash for disposal to creditors.
It can also extend 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.
Under the present system, a bank found in early stages of distress and
non-compliance with standard conditions and ratings is placed under the
BSP's PCA. When all options have failed, the bank is ordered closed by
the BSP's Monetary Board. 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.
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