Inquiry sought on plight of closed banks’ depositors

MANILA, Philippines - Lawmakers have sought a congressional inquiry into the plight of thousands of depositors of the 300 banks ordered closed by the Monetary Board (MB) in the last 16 years.

Reps. Ronald Cosalan of the lone district of Benguet, Arthur Defensor Jr. of Iloilo, Jesulito Manalo of ANGKLA party-list, and Romero Quimbo of Marikina City have filed House Resolution 869 directing the committee on banks and financial intermediaries to conduct an inquiry to check on the status of depositors of the closed banks.

The inquiry aims to guide the formulation and crafting of necessary reform legislation that would provide ample protection and remedies to the depositing public.

The lawmakers said a majority of the closed banks are rural banks, thrift banks, savings banks and small commercial banks with deposit comprising funds of retirees, cooperatives, small-scale businesses and mutual fund associations, among other depositors.

Currently, the maximum deposit insurance coverage of the Philippine Deposit Insurance Corp. (PDIC) of P500,000 per account does not cover the entire amount of deposits in the closed banks, the lawmakers said.

The resolution states that the depositors of the closed banks suffered substantial and irreparable economic damage as they could not recover their deposits in excess of the maximum deposit insurance coverage.

“The most adversely affected in this spate of bank closures are our constituents who entrusted their hard-earned money to the banks only to lose the same without any fault on their part,” the lawmakers noted.

They cited that in the recent closure of the Export and Industry Bank (EIB) - a commercial bank with thousands of depositors consisting of retirees, entrepreneurs and cooperatives among others - the depositors bonded together to seek measures to recover their deposits but this has been hampered by inadequate legal remedies and protection despite the fact that a representative of the PDIC sits in the board of directors of EIB.

One of the points raised by the lawmakers in the resolution is Section 30 of Republic Act 7653 or the New Central Bank Act. The depositors who have actual, substantial, material, direct and immediate legal interest in the continued operations of banks are deprived of judicial recourse because only the majority stockholders of the bank have legal standing to question the orders and resolutions of the MB.

Section 30 provides that orders and resolutions of the MB as regards conservatorship, receivership and liquidation of troubled banks are immediately final and executory; and the right to judicially challenge the same is solely vested with the majority stockholders of the bank.

Historically, the authors recalled that under Section 29 of Republic Act 265 or the original law that created the Bangko Sentral ng Pilipinas, the right to judicially challenge the orders and resolutions of the MB as regards conservatorship, receivership and liquidation of troubled banks thereof was not exclusively vested on the majority of its stockholders and the onus (or responsibility) of justifying the closure of banks lies with the MB.

“It is now imperative that we introduce reforms in our banking statutes to give ample protection to the depositing public,” the lawmakers said.