Philippine Deposit Insurance to build more cases vs Legacy officials

MANILA, Philippines - The Philippine Deposit Insurance Corp. (PDIC) said it is building up its own case against bank officials responsible for the collapse of 12 rural banks of Legacy Group.

PDIC General Counsel Romeo M. Mendoza Jr. said that the PDIC is taking a “conservative and prudent” approach to the issue considering the limitations of the deposit secrecy law.

But Mendoza said the PDIC is determined to make concerned bank officers account for the failure of the rural banks, which are placed under PDIC receivership.

The Bangko Sentral ng Pilipinas and the Securities and Exchange Commission have already filed cases against Legacy officials.

Mendoza also explained that while the deposit secrecy law or Republic Act 1405 allows the PDIC to examine deposit accounts before settling deposit insurance claims, the same law prohibits the deposit insurer from sharing its findings with other regulators.

Mendoza said that there are two schools of thought on the applicability of the deposit secrecy law on closed banks.

“The more aggressive interpretation is that the deposit secrecy law does not cover closed banks hence, PDIC may disclose deposit account information to other regulatory agencies and third parties,” Mendoza said.

A more conservative interpretation, he said, is that the deposit secrecy law is a special law declaring all deposits to be “absolutely confidential.”

Mendoza said the only exceptions allowed were “upon written permission of the depositor, or in cases of impeachment, or upon order of a competent court or in cases where the money deposited or invested is the subject matter of litigation.”

“Contrary to allegations of stonewalling and foot dragging, PDIC has chosen to take the conservative approach to ensure that the cases PDIC will be filing soon will not be dismissed due to technicalities arising from differing interpretations of the deposit secrecy law,” Mendoza said.

“This has consistently been the position of the PDIC legal sector regarding cases involving deposit records,” he said. “The deposit secrecy law is not necessarily an impediment for BSP to pursue its Legacy investigations.”

PDIC earlier said it hoped BSP’s filing of a case against Legacy could lead to the issuance of subpoena for PDIC to produce the deposit information it required.

The PDIC said another option is for the PDIC Board of Directors to appoint and deputize BSP investigators to join PDIC in the investigation of deposit accounts.

PDIC also suggested filing cases jointly with BSP.