Philippine Bank Closure - Facts You need to be Aware of

By: DiversityHuman in Business

Export and Industry Bank Inc (EIB) is now on a bank holiday, following its "inability to meet its obligations." (yahoo news)export-bank-closure.jpg Another traumatic incident to all bank depositors. Last year, LBC Development Bank, a unit of the LBC Group, has been placed under receivership of the Philippine Deposit Insurance Corp. (PDIC) due to liquidity problems (inquirer.net). Same goes to Banco Filipino which was closed by Bangko Sentral ng Pilipinas (BSP) due to claims that Banco Filipino has exceeded its assets with more liabilities which is against Philippine law which states that a bank's assets must equal or be in excess of its liabilities with an 8.4 billion pesos worth of liabilities(wikipedia).

In a statement, BSP said the Monetary Board has placed EIB "under receivership" for its inability to further operate "without probable losses to its depositors or creditors." EIB has already agreed to "surrender" its operations to the BSP, the central bank added. BSP said PDIC is ready to "service valid deposit claims from depositors of EIB," as well as to process claims the soonest possible.

Impact to depositors

First and foremost, depositors in the Philippines are always losers. We don't have a descent bank act that protects our depositors who deserve the right to get their hard-earned money. PDIC can only give a maximum of Php 500,000 but what makes it worse is that PDIC will not return the whole amount even if the deposit is under Php 500,000.

What's the role of Bangko Sentral ng Pilipinas to protect?

BSP is monitoring the asset and liabilities status of local banks but they don't make early announcement or forecast if the bank has to be seized anytime soon. The real story is hidden leaving all depositors victims of this anomaly. Let's just call it 'Philippine banking system conspiracy'. Why the hell in the world that BSP dont give any advise or warning about a bank status? Of course, they are dealing MONEY! Who among our readers knows the list of individuals who runs the BSP? How can we be assured that BSP officials don't receive any monetary kickbacks from these closing banks?

The way how the BSP runs the local banking system is a major betrayal to the trust of the general public! How can we have confidence in our banks if BSP can't provide us fair compensation claims and protection againt these banks who take the advantage of lax and poor governance?

Our banking system is absolutely corrupt. I don't think that we are having issues in setting monitoring parameters because we are known in creating thousands of laws and policies. But here's the thing, we have very poor implementation of our laws in the Philippines and bribery comes into the picture which makes it more difficult to the public.

Hard-earned money gone in 60 seconds!

Take a look at this situation. Juan earns too little everyday but against all of those difficulties he still find himself a way to save Php 500 a month. This could be extremely small savings but remember he earned the money the hard way, could be like sacrificing some other things just to have a little savings and after a year or so he learns that the bank where he deposited the money is in danger of liquidation, what would be his reaction? Money gone in 60 seconds.

Don't be a victim of these greedy banks!

Educate yourself. Be aware of any business issue. Check the market trends and bank news.

Is it still safe to save money in our local banks?

Yes. But do not place all of your money in one basket. There is no guarantee that your money is safe even huge banks with large assets can also be in danger of liquidation. You just have to be smarter than they do. If you have Php 500,000 then spread it to various banks whose owners/investors are not the same.

How to determine the right bank and how to lessen the risk of your personal savings/bank investments?

In general, avoid banks who offers too high interest rate. This is a very critical indicator that the bank is badly in need of more investors/depositors to cope with its financial needs. Compare there interest with other local banks. Offering high interest rate is a very enticing campaign to draw more depositors.Come to think of this, banks per se is not a money generating institution. Higher interest rate means higher bank expenses ( relative to its depositors). And when they are not able to invest the money appropriately then they will end up losing more.

Second, downsizing of the company. If you hear that your bank removed some of it's bank officers especially the ones who holds higher positions and if there are rumors that the bank will conduct a review of their bank organization to possibly remove redundant positions, then don't just hope for the best but act to it. Start to move your money into other banks.

Third, sudden change of loan requirements and increased number of declined loans. If the bank becomes extremely strict to any loan application and it declines loans even for a very small amount then its an alarm that the bank is facing financial unstability.

By the way, I am not a banker nor an economist but I just remembered some of these things when I was in college. My room mate took up Economics and everytime we had a small talk he usually brought up topics like this. So might as well share this to you guys.


DiversityHuman

Author

DiversityHuman

Posted by DiversityHuman.com on 29 Apr 2012



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