Two rural banks declare 'holiday'

CEBU - This is one holiday that makes people upset.

Two rural banks in Cebu declared a bank holiday leaving depositors in quandary while the Bangko Sentral ng Pilipinas (BSP) said that it will look into the matter.

BSP, in a press statement sent to The Freeman yesterday, said that it will make the appropriate announcement to the public at the earliest time possible on this matter.

The two rural banks under the Legacy Group — Pilipino Rural Bank Inc. in Mandaue City and the Philippine Countryside Rural Banks, Inc. (Rural Bank of Liloan), both declared a bank holiday last December 8 and December 9, respectively.

A bank holiday is defined as a day which banks are legally closed.

Edgar Cando, the president of PCRB, said that the management is working with the regulators to bring operations back to normal. Other rural banks under the Legacy Group that are located in Cebu, the Bank of East Asia (Rural Bank of Minglanilla) and the Rural Bank of Carmen, Inc., had normal operation as of yesterday.

Manuel Manzanares, manager of Rural Bank of Carmen, Inc. and Bank of East Asia, said yesterday that they have not declared a bank holiday.

“Wala, we do not have any bank holiday so far,” says Manzanares as his statement is echoed by Maria Karen Pitoy, the president of Rural Bank of Carmen Inc.

The other six rural banks of Legacy that were found to be undercapitalized are the Rural Bank of Parañaque Inc.; Rural Bank of San Jose (Batangas) Inc.; Pilipino Rural Bank Inc.; Rural Bank of Calatagan (Batangas) Inc. (now Dynamic Rural Bank); Rural Bank of DARBCI Inc.; Rural Bank of Kananga (Leyte) Inc. (now First Interstate Rural Bank) and the San Pablo City Development Bank.

In February 2007, BSP officials had recommended that the said undercapitalized rural banks, except for San Pablo City Development Bank, be put under receivership in order to prevent its assets from further depletion, but this was however set aside by the Monetary Board.

According to BSP, there are 2,011 rural banks in the entire country with combined deposits of P108.1 billion.

The nine rural banks were found by the BSP examiners to be undercapitalized during their latest audit on July 31, 2007.

The said Legacy banks were reported to have an aggregate capital deficiency of P2.5 billion. Such report however was strongly denied by the bank management.

The banks under Legacy filed a temporary restraining order to prevent BSP from acting on the said findings, which in effect prevented the central bank from closing the said banks.

BSP filed a petition before the Court of Appeals in Manila after the lower court favored the contention of Legacy contending that such ruling violated the banking regulator’s “Close Now, Hear Later” doctrine.

Last November 24, the Supreme Court issued a temporary restraining order to stop the enforcement of the lower court ruling that ruled in favor of the Legacy Group banks.

Supreme Court’s second division, after deliberation, resolved to issue a TRO effective November 24, which would continue until further order from the said court.

The banks all operate under the Legacy Group, which is primarily involved in selling pre-need plans.

Agents, Investors Move

Also yesterday, over 400 investors and pre-need insurance agents in Cebu of the PCRB and Pilipino Rural Bank will dish out their official and legal move today against the operator Legacy Consolidated Plans Inc. following the declaration of “bank holiday.”

In a closed door meeting held yesterday afternoon, active insurance agents and big depositors of the bank, who asked not to be named, said that they have to do something to pressure the share holders of Legacy Group to re-open the bank or provide assurance to the depositors and insurance investors, otherwise they have to file a formal complaint against the owners.

Today, the group will meet with their legal counsels to formulate proper moves against the company.

“We have to know what’s going on, and what will happen to our investments, and deposits and our clients’ money. We are the front-liners, we sell the company’s products, now are blamed by our clients,” an agent said.

Legacy had reportedly offered very attractive investment products, such as “double-your-money,” which lured mostly retirees to invest their retirement money on the product as it promised a much higher yield compared to other investment instruments, available in the market. — with reports from Ehda M. DagoocNLQ (THE FREEMAN)