Saturday, June 27, 2009

A Matter of Miscommunication?

Had a long teletalk with a close consultant of Jose Nograles, PDIC President and these are the details we gleaned from our discussions:

a. PDIC is singling out Davao as the nest of depositors who "because of greed" invested their money in legacy banks even though there wasn't any single legacy bank in Davao. We immediately corrected the use of the word invest since this implies the possibility of loss or gain from putting in one's money in a venture or financial instrument. We told him that investment is different from deposit which gives a fixed return on one's money placement, and the fixed return is called interest rate per annum. And when we talk about Legacy banks, we talk about deposits. The consultant gave me the impression that PDIC will resist paying these Davao depositors, and other such depositors;
b. Based on his talks with Joepot, the consultant sees no problem with depositors who opened multiple accounts within the maximum deposit insurance and PDIC-insured account configurations especially when joint accounts and ITF accounts are made with qualified beneficiaries- persons within the 3rd degree of consanguinity; and
c. That mailing of checks had one objective of making life difficult for depositors who opened dummy accounts using employees, friends, etc. Now it will be up to the dummy who gets issued a check in his/her name to give up what the check represents- a big amount to a driver, maid, or even a friend in need. It will be more problematic for the real owner of the funds to trace a former employee, so as to deposit the check made in the latter's name.

We also mentioned PDIC's limiting the use of a SPA to those living abroad and medically incapacitated. The consultant was surprised to find out that PDIC turned down depositors (who were temporarily in Manila to file claims) from having the PDIC officer attest to their appearance with their valid IDs. This process would have enabled these depositors to execute an SPA while in the Philippines. But no, the PDIC insisted that these depositors go back to their respective countries and execute the SPAs in the nearest Philippine consulate, which is sometimes several hours and hundreds of miles away. Talk about mindless bureaucracy, and making life tough for the depositors, who are the raison d'etre of PDIC.

The consultant believes that miscommunication is the root cause of the image problem of PDIC; and that PDIC intends to pay legitimate depositors. When asked why it is taking too long, he said that the processing and verification of 135,000 accounts in Legacy banks and thousands more of non-Legacy bank accounts is causing the delay. We believe otherwise: our previous posts on the topic establishes the fact that PDIC is illiquid and is relying on its monthly assessment collections to pay the depositors.

We are of the opinion that if only PDIC had acknowledged its insolvency, and admitted that the situation became worse by the subsequent failure of more than a dozen non-Legacy banks, then depositors would understand. They only needed assurance that their deposits would eventually be paid. The scare tactic of calling tens of thousands of accounts as dubious due to lack of or missing bank documents did not help the situation, it only cause anxiety and anguish, leading to the formation of DEADBOL (go here to register).

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