A lawmaker has asked the House of Representatives to investigate the closure of LBC Development Bank last week, the second notable bank to collapse in six months after Banco Filipino Savings and Mortgage Bank.
LPG Marketers’ Association Representative Arnel Ty filed House Resolution No. 1749 urging the committee on banks and financial intermediaries to look into the declaration of a bank holiday by LBC Bank.
The closure has unnerved not only LBC Bank’s thousands of depositors but also overseas Filipino workers who used the bank’s parent firm to send their remittances.
“This case interests us because regulators were fully aware the bank had been having serious problems, long before it was finally closed down on September 9,” said Ty, a member of the committee on banks and financial intermediaries.
He said that the probe should also determine whether Congress must amend banking laws to make regulators more proactive in going after banks which prey on depositors with a promise of high interest rates and a guarantee of a full refund from the government with the maximum deposit insurance of P500,000.
LBC Bank had 321,516 accounts with a total of P6.09 billion in deposits. Although 99 percent of the depositors were covered, only P3.73 billion of the deposit value was covered under the Philippine Deposit Insurance Co. In contrast, Banco Filipino had 172,323 depositors and insured deposits of P7.78 billion.
Ty wondered why the Bangko Sentral ng Pilipinas (BSP) did not enforce its cease-and-desist orders it had issued against the bank on charges that it made excessive advances to sister firm LBC Express Inc.
“This could serve as a lesson for the BSP to henceforth be extra watchful when in comes to banks that have tie-ups with nonbank remittance firms, whether these are affiliates or not, but especially if these are affiliates of the banks concerned,” Ty said.
In its report after LBC Bank declared a holiday, the BSP reported that the bank had made substantial advances to LBC Express and had amassed non-performing and high-risk loans without adequate provisions.
Ty said that just like most banks that went belly up, LBC Bank offered unusually high interest rates to lure depositors.
He said high interest rates should be considered “virtual red flags or warning signs” because “these institutions may possibly be under extreme pressure to lure new money.” Gil C. Cabacungan Jr.