35,000 hit by bank closures in 1Q, lawmaker decries late action in LBC Bank fraud

InterAksyon.com
The online news portal of TV5

MANILA, Philippines – A total of 35,669 Filipinos lost a combined P712.78 million in deposits entrusted to five lenders that closed down this year, a party-list lawmaker said, even as he decried the belated discovery of fraud and regulatory action in LBC Development Bank.

Shut down by the BSP as of March 15 were the Capitol City Bank (Cavite) Inc., Rural Bank of Gainza (Camarines Sur) Inc., Rural Bank of Majayjay (Laguna) Inc., Rural Bank of Buenavista (Agusan del Norte) Inc., and Consolacion Rural Bank (Laguna) Inc., said LPG-MA Rep. Arnel Ty, a member of the House committee on banks and financial intermediaries, in a news release.

At the same time, he said the belated discovery of massive fraud at the collapsed LBC Development Bank has prompted him to push for stronger regulatory and legal actions to discourage future bank anomalies.

“We’ve been taken aback by the shameless embezzlement of deposits at (the now defunct) LBC Development Bank, supposedly carried out at the behest of no less than the institution’s chief executive officer,” said Ty.

The Philippine Deposit Insurance Corp. (PDIC) earlier filed syndicated estafa charges against the president and five borrowers of LBC Development Bank, which was shut by the Bangko Sentral ng Pilipinas (BSP) on Sept. 9, 2011.

Through House Resolution 1749, Ty had pushed for a congressional inquiry into the bank’s collapse, which ruined 321,516 savers who lost an aggregate of P6.09 billion in deposits.
Based on the criminal complaint filed with the Department of Justice, LBC Development Bank president Ma. Eliza G. Berenguer and borrowers Benito Ramon V. Araneta, Ma. Lourdes Senn, Ernesto G. Barrios, Charito S. Zambales, and Francisco A. Climent helped themselves to at least P229.5 million in bank funds.

According to the PDIC, Berenguer, from October 2006 to January 2008, directly instructed the lender’s other principal officers to divert bank funds to the deposit accounts owned by the five borrowers and maintained with other institutions.

The Bureau of Immigration has already been issued a “lookout order” to prevent the six individuals from leaving the country.

‘More forceful pre-emptive actions’

Ty stressed the need for regulators to take forceful preemptive actions against unsafe and unsound banking practices in order to protect depositors, encourage savings, reinforce public confidence in banks, and build up the industry.

“We are ready to help regulators, if they need specific amendments to our banking laws and extra powers to enable them to rigorously supervise banks and deal with institutions in apparent trouble,” he said.

Whenever a bank appears to be taking on too much risk, the BSP normally compels the institution to increase capitalization, reduce bad loans, or stop certain unsafe activities.
The BSP had issued a number of cease-and-desist orders against LBC Development Bank before it collapsed.

However, these corrective measures were evidently not complied with, according to Ty.
The bank eventually became insolvent due to unwarranted advances, large amounts of non-performing as well as high-risk loans, against which no adequate provisions were set aside; and the unusually high interest rates it paid for deposits, according to the BSP.

http://www.interaksyon.com/business/57822/35000-hit-by-bank-closures-in-1q-lawmaker-decries-late-action-in-lbc-bank-fraud