Philippines: Seven banks in receivership

This is from the Tribune.
While the central bank claims that the banking system is robust, no doubt the Philippine financial system will not be completely immune from the global crisis that is causing problems worldwide for banks.


BSP: RP banking system robust despite 7 banks in receivership
12/13/2008
The Bangko Sentral ng Pilipinas (BSP) yesterday added three more banks which unilaterally declared bank holiday under receivership of the Philippine Deposit Insurance Corp. (PDIC). The three are the Bank of East Asia based in Cebu; the First Interstate Bank based in Tacloban; and the Philippine Countryside Rural Bank based in Cebu.
This brings the number of banks placed by the BSP under PDIC receivership this week to seven.
The seven are part of a group of banks that obtained from the regional trial court last June 2008 a temporary restraining order (TRO) and injunction, affirmed by the Court of Appeals (CA) last Sept. 30, covering the submission by the BSP to its policymaking body, the Monetary Board (MB), of the 2007 Report of Examination covering their respective banks; and the MB from acting on the basis of the Reports of Examination.
Last November, the Supreme Court issued a TRO to restrain the implementation of the decision of the CA and the Regional Trial Court of Manila, Branch 28. This paved the way for the BSP and the MB to act on the 2007 findings which were validated by the 2008 Report of Examination.
The BSP had been monitoring these banks well before the global financial turmoil because of potentially unsafe and unsound banking practices.
Four small rural banks in the Philippines were previously placed in receivership after they and four other provincial banks were hit by heavy withdrawals, the BSP said yesterday.
The bank stressed that the runs affected “only a tiny fraction of the banking system and that this reaffirms the (BSP’s) assessment that the banking system remains stable, highly capitalized, and highly liquid.”
The Rural Bank of Parañaque was placed by the MB under the control of the PDIC on Tuesday, while the Rural Bank of Bais in Negros Oriental, the Pilipino Rural Bank in Cebu and the Rural Bank of San Jose in Batangas went into receivership Thursday.
The provincial banks — the Philippine Countryside Bank in Cebu, the Dynamic Bank (Rural Bank of Calatagan), the San Pablo City Development Bank in Laguna and the Nation Bank in Bacolod City— have all declared bank holidays, the BSP reported. The BSP said their financial condition is still being assessed.
The affected banks are based mostly in Batangas province south of Manila as well as the central islands of Negros and Cebu.
The BSP said it is “investigating these banks to determine their financial condition and viability as well as violations of banking laws that may have been committed.”
It cautioned the public to “avoid making (a) sweeping judgment on the condition of individual banks based on pure speculation as these tend to be self-fulfilling.”
BSP Deputy Gov. Diwa Guinigundo has declared that the country’s banking system remains healthy despite the declaration of bank holiday by eight banks this week.
Guinigundo told reporters the number of banks that have declared bank holidays is not representative of the domestic banking system.
He explained that Philippine banks are generally strong in terms of capital base, asset quality and profitability amid the current global financial crunch because of the policy improvements implemented by the BSP in the past years.
“In fact if you look at the total resources of the banking system these assets continue to grow,” he pointed out.
Guinigundo said since banks are now stronger they are able to accomplish their mandate of intermediating savings which, in turn, are used for lending to corporations and individuals.
He defined bank holiday as the situation wherein banks cannot service its depositors anymore due to lack of funds and other reasons.
The BSP announced late Thursday that a total of eight banks have declared bank holiday this week, four of which have been placed under receivership of the PDIC, while the other four are still being assessed by the BSP.
The BSP, in a statement, pointed out that these eight banks “represent only a tiny fraction of the banking system and that this reaffirms the BSP’s assessment that the banking system remains stable, highly capitalized and highly liquid.”
It said it is investigating the banks “to determine their financial condition and viability as well as violations of banking laws that may have been committed” and “will take appropriate action based on the findings.” AFP and PNA