Tuesday, May 19, 2009

The Legacy Bank Mess: Tragedies and Broken Lives (Part 7)

Mrs. AL, a 64-year-old woman, tearfully narrated how on Friday, May 15 she went to the PDIC Makati office begging and crying for the release of her checks. She got the standard reply: wait for our letter or call advising you of the status of your claims. She had six time deposits ranging from P50,000 to P100,000 per CTD, in her name, her husband’s name, and four of her children’s. They were depositors of the Rural Bank of Paranaque (RBOP) since 2002. Her 67-year-old husband is stroke-incapacitated, and the interest payments from their time deposits were their major source of income. She worked as a seamstress, working up to midnight. They had filed claims last March 24, 2009. She is scheduled for a breast biopsy: she is not only frightened that she may have cancer, but scared that she would not have money to pay the medical and surgical costs. Her husband needs his medicines. After almost two months of waiting, they are desperate.

Distraught would be a good way to describe two ladies, Mrs. P and Mrs. M. Both retired, they too were RBOP depositors. ”Nagkakasakit na nga kami sa kakaisip, (we're getting sick just thinking about this),” they said. Family members, including Mrs. P’s daughter who lives abroad, had placed their savings in the bank. These ladies don't belong to the “small depositors” category (below P100,000) whose claims the PDIC said it would service first. After all, both were successful professionals during their active years: one was an IT executive for a universal bank and the other a top marketing director of a distribution firm. They decided to invest their money in the rural bank because aside from having been around for decades, it offered double-your-money-in-six-years schemes. They figured it was prudent- there were no risks because the bank, as all banks are, was under the regulation and supervision of the BSP and PDIC and in a worse scenario case, their deposits were insured with the PDIC.

Vicky and Irene, long-time family friends, were also officemates in Angola, an insurgency war-torn country that is 7,000 air miles from the Philippines. They had deposited most of their hard-earned savings in Dynamic bank and RBOP. Irene wrote, “I have been working in Angola since 2003. Now that my work is in jeopardy due to global crisis, I'll be left with empty pocket after all those blood and sweat of hard work abroad!” Vicky, a single mother, has been working in Angola for 15 years running and was looking forward to retirement in a year or two, and finally spend all her time with her children. With the loss of income from those high paying deposits, she is resigned to working in Angola for several more years. However, she is now worried and angry that PDIC, based on Nograles’ press releases, may not pay her time deposits, money that she had slaved and saved for 15 years.

My husband is in US as an immigrant with a low profile job. He went there last year just to renew his greencard, but when RBOP closed down, he was forced to stay there to support me and our two children who are only 5- and 2-year-old girls. We don’t want to leave our country but because of what happened, we lost hope not only in PDIC, but in the government and so we decided to go after US citizenship in the future. CS said, “Our country is hopeless with all the corrupt officials everywhere. I don’t want our children to grow seeing this kind of [moral] environment . Our ROBP CTD was everything we had. And now, all i can do is pray that we can still recover it.”

Joe L. is a naturalized American citizen from California who mortgaged his home and put his entire 401K retirement funds to invest with legacy CTDs. He counted on PDIC’s protection. If PDIC renege on their responsibility he is thinking of bringing the matter to U.S. EMBASSY so they can issue a warning to all Americans to refrain from doing business with all Phillipine banks because Philippine government insurer is corrupt. To him this is not just a domestic issue but economic sabotage.

SB is a Briton who retired in the Philippines, and this is what he wrote: “I borrowed money against my house to pursue 'good' interest rates in what was 'sold' to me as safe deposit instruments. I was never a rich man by UK standards. I used to be secure, but now I am back where i was 20 years ago, struggling… I now face losing the house if I cannot recover a high percentage of the money.” DW, a Briton living in the Visayas who had deposited most of his savings in legacy banks, had lost a substantial part of his passive income with the closure of the banks last December. He has accumulated a huge debt with monthly interest for the hospital and funeral expenses due to the long hospitalization and eventual death of his Filipina mother-in-law. Now he has to postpone heart surgery that he urgently needs. He lamented that “finding money to pay bills and for food and water to live off, let alone pay the hospital, the doctors, the funeral” bills are his priority.

J. Basco encapsulates what most, if not all, of the 60,000 legacy bank depositors with an estimated 135,000 accounts are now thinking and feeling, and we quote him: “Today I asked my sister for a loan to leave this country, legacy has (sic) all I have ever saved, I now leave this country and my wife as a broken man, too old to find work and no trust in anyone, an old fool who trusted the PDIC." There are no categories- sophisticated and unsophisticated, small and big depositors, locals and foreigners- only trusting depositors who had faith and confidence in the banking sytem, who entrusted their hard-earned money into rural banks, regulated by the BSP and PDIC, who guaranteed that their deposits were insured.

A total of 13 legacy banks closed last December, 2008. PDIC could not raise the funds to pay the P14 billion or less (if we eliminate the fictitious and fraudulent accounts) of these rural banks’ insured deposits. Another 2 rural banks in Pampanga and one in Mandaue city closed in January, 2009. This May, two more rural banks were placed under PDIC receivership; its two affiliated rural banks have been redflagged by the BSP. There are another two rural banks in Cebu that have not paid the interests due on time deposits, and may be candidates for receivership. Its depositors would soon join the swelling ranks of the great unpaid, which will inexorably lead to the erosion and possible collapse of public confidence in the rural banking system.

Why are the banks failing? Because BSP and PDIC were remiss in regulating and supervising these banks. Why cannot PDIC pay up? Because it is insolvent. Why is it illiquid? Because most of its funds are tied up in long-terms loans to, non-performing assets from and equity in the commercial banks. Why cannot it borrow? Because BSP refused to lend it more money. Why? That is a question that is simple yet difficult to answer. Perhaps BSP Deputy Gov. Nestor Espenilla, Jr. wanted us to read between the lines when he said in a congressional hearing that “we are dealing here with an organized syndicate that from day one was created to exploit human nature and weak links in the legal, regulatory, and enforcement framework of our banking and financial system.”

Last month, we were passing by a newly constructed mansion sitting in a big corner lot in Molave St, Ayala Alabang; we just could not help but ask its neighbor’s security guard who owned this compound made up of two beautiful houses. The guard said that all he knows is that “a Central Bank official owns it.” There may be no story here, or is there?

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