BSP orders closure of Naga-based G-7 Rural Bank

The Bangko Sentral ng Pilipinas (BSP) has ordered the closure of the Naga-based G-7 Rural Bank, placing it under the receivership of the Philippine Deposit Insurance Corp (PDIC).

Long mired in controversy, the Monetary Board shut down the bank, saying it was doing so to protect its depositors who have been asking the BSP to intervene on their behalf following bank’s reported failure to meet withdrawal demands.

PDIC assured investors that it would conduct pay-out of valid claims for insured depositors as soon as possible.

PDIC said it would conduct an examination of available bank records to determine the validity of claims and the speed of the pay-out would depend on what bank records were still available after taking over.

“For deposit insurance claims that are deemed valid, the PDIC said pay-out normally take place after nine days,” the PDIC said.

“For claims that need further verification, more in-depth examinations are conducted which may include interviewing claimants and requesting them to submit additional supporting documents,” the PDIC explained.

G-7 Bank is a seven-unit bank with branches mostly in the Bicol Region with head offices in Naga City and branches in Albay, Camarines Sur and also in Metro Manila.

G-7 depositors flocked to the BSP last month to redress their grievances but BSP Governor Amando M. Tetangco said there was a process that all banks have to go through to address problems that arise.

Tetangco refused to make a specific comment on G-7 but said the normal procedure was for the BSP’s Supervision and Examination Sector to assess the situation at the start.

G-7 has been a brewing problem since earlier this year after the bank stopped paying interests on its deposits and was rumoured to have filed for bankruptcy amid heavy withdrawals from depositors.

According to depositors, G-7 had offered interest rates of up to 12 percent per annum for time deposits, about twice the prevailing market rate. But since March, the bank had reportedly stopped paying the returns.

In a statement, G-7 announced that the bank was in a “transition period of upgrading from a rural bank into a thrift bank.”

G-7 claimed it was in the process of getting a new investor, Finbar Asia Philippines Inc. along with it’s parent company, Finbar Securities, Inc.

G-7 said the Finbar Group was planning to invest new funds by the end of June 2008 but it was not clear whether this infusion actually materialized.

G-7 is owned by businessman Fidel Cu and had been operating for nearly three decades with branches in the Bicol region as well as in Pasig and Quiapo.