We were excited to hear Mrs. A. Lego's (she agreed to the use of her family name) account of her scheduled visit to PDIC SSS bldg. so I called her up today. She told us that she, again with her daughter, arrived inside the PDIC office at around 3.30 pm. She noted that the Makati rally (against ConAss) was building up all around, and here she was ready to conduct her own rally inside the PDIC premises.
As usual, she ended up in front of the information counter. She forgot to ask about Atty Elaine and talked with a customer assistance officer who told her to wait for a letter. She countered that she would not leave the office until she got her check, while waiving her ultrasound findings and her husband's senior's medicine booklet. The officer got her yellow slips, and told her to wait while he checked the status of her claims. He returned with the news that a check would soon be mailed to her, but for only one claim, the P100,000 time deposit that had matured last January, 2009. She requested that the claim of her husband be included, but was told that they could only settle one claim. She asked why they could not give her the check over-the-counter; she was told that checks are mailed. So Mrs. Lego is giving the PDIC until Tuesday next week to make good its promise.
Mrs. Lego's experience with PDIC provides us with two learning points:
a. If you are willing to create a scene in the PDIC office, and do it frequently, you may get a check mailed to you;
b. PDIC cannot pay all claims at the same time- Mrs. Lego and her children had a total of six CTDs but only one could be settled. This just confirms our contention that PDIC is insolvent despite its P61.5 billion DIF, and is settling claims based on its monthly collections from the banks. Using the verification process as an excuse is just that, a subterfuge to stall and delay paying legitimate claims.
Wouldn't it be interesting to know if or when Mrs. Lego actually receives her first check? Subaybayan...
Showing posts with label DIF. Show all posts
Showing posts with label DIF. Show all posts
Thursday, June 11, 2009
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?
Monday, May 18, 2009
The Legacy Bank Mess: Victims Twice Over (Part 6)
In a press conference in March, 2009, Jose Nograles said PDIC suspected that over P6 billion of an estimated total of P14 billion in deposit claims by clients of 12 foreclosed Legacy banks were fraudulent because they lacked supporting documents. This revelation cropped up just several days after BSP rejected his loan proposal of P14 billion: how convenient for the state insurer looking for a way out. He explained that six supporting bank documents are required to validate a deposit but accused legacy bank personnel of hiding and losing these bank documents. He then appealed to them to turn over the documents in their possession or face charges in court.
Nograles has the temerity to ask depositors whose accounts cannot be validated due to incomplete documentation to run after their agents and solicitors. Nograles has the gall to advise powerless depositors to file non-litigable cases against non-banking people when the PDIC itself, after five months of forensic investigations, has not fined or charged any banking officer who they said had hidden pertinent bank records. Under PDIC’s charter, bank officials who refuse to surrender pertinent documents could be fined from P50,000 to P2 million and/or penalized a long jail sentence.
Nograles said missing bank documents could indicate the theft of depositors’ money by bank officials, or that missing records could also indicate the deposit claims were fictitious. Whatever it indicates, bank depositors are entitled to full compensation of their insured and legitimate deposits. Of the six so-called required documents, five of them are under the control of bank personnel. So even if a depositor has only one of them- the Certificate of Time Deposit or passbook- and matching proof of actual funds inflow, then PDIC is bound to return the money of the depositor. In a speech delivered before a joint meeting of the MAP, PCCI and the MBC on August 28, 2000 at the Hotel Intercontinental, then PDIC President Norberto Nazareno shared his experience with the closed Rural Bank of San Miguel (RBSM). As in the case of the legacy banks, Nazareno said that “anomalous accounts, splitting of deposits and the conversion of manager's checks into split accounts have hampered its [PDIC’s] audit and consolidation of the records leading to the delay in the servicing of insured deposits’ of RBSM depositors.” He said, "As we paid the depositors, they come with their certificate of time deposit but we see that is not recorded in the bank's records." He then admitted to having “to pay their insured deposits since the certificates were signed by authorized signatories, but only after they execute affidavits to support our cases against owners and/or managers.” This precedence underscores DEADBOL’s stand that missing documentation of bank records attended by fraud was not and should not be a reason nor an excuse for PDIC to avoid paying the valid claims of legitimate bank depositors holding official certificates of time deposits. If in 2000 the PDIC paid the RBSM depositors under such circumstances, there is no reason why the PDIC of today cannot pay the legacy depositors. Unless, of course, if the PDIC is illiquid and insolvent- which we have already established and proven.
In fact, the younger Nograles’ accusations of fraud and creation of fictitious accounts by legacy bank officers calls into play the well-established principle that records that would otherwise be conclusive evidence may be attacked as fraudulent. Depositors’ records (CTDs, passbooks, canceled checks) should be considered as evidence, as what PDIC’s Nazareno did with RBSM. Even the Federal Insurance Deposit Corp. of the USA recognizes form of documents which would be considered as conclusive proof, in the event of the liquidation of an FDIC-insured bank when the bank's records are either missing, incomplete, or incorrect. In a FIDC Advisory Opinion, the Assistant General Counsel wrote that in such cases “where the records of an insured bank differ from the records of the account holder, ... the FDIC will accept as conclusive the genuine, unaltered records of the account holder, maintained in good faith and in the ordinary course of business.” The UK’s Financial Services Compensation Scheme “give investors the chance to agree the balance of their own account before accepting payment, or ask them to submit any relevant documentary evidence where they believed a discrepancy existed which we would then investigate further.” PDIC, as an insurer, should not be allowed to escape paying the legitimate claims of depositors who relied on its statutory backing of their accounts and on the ability of their banks to fill out deposit records properly.
Nograles tested the heights of absurdity by claiming “The depositors and the PDIC are both victims here.” How could PDIC be a victim when it supervises banks, and can examine and investigate its records? How could it be a victim when it can fine erring bank officers and owners a maximum amount of P2 million? How could it be a victim when it has the legal power to impose prison mayor on banking personnel who violates its rules? PDIC has all these powers when a bank is operational and open to the public. Just imagine what it can do when the bank has closed and is placed under its total control, and yet Nograles has the audacity to preposterously claim that it is a victim, too.
There is no doubt that legacy bank depositors are victims of Celso de los Angeles and his banking minions. However, as events are shaping up, the legacy bank depositors are now being victimized once again, by the younger Nograles of PDIC. He is not only reneging on PDIC’s basic mission of protecting insured depositors, but his press releases and pronouncements seem to blame the legacy depositor for patronizing these banks. Blaming the victim is a common resort of the guilty. And Jose Nograles is certainly guilty. He is guilty of not acting on PDIC’s 2005 findings of anomalies and wrongdoings in the legacy banks. He is guilty of not continuing the examination of bank records to ensure accurate and complete recordkeeping as provided by the PDIC charter. He is guilty of not filing charges against legacy bank officers for hiding bank documents. He is guilty of not ensuring that the cash reserves of the DIF were enough to pay insured deposits of the legacy banks. He is guilty of not being able to borrow funds from the BSP to pay the insured legacy depositors. And because PDIC is insolvent, he is guilty of coming up with all kinds of excuses in order to unconscionably delay and avoid paying legitimate depositors. He is guilty of erosion of public confidence in the rural banking system. And soon, he will be guilty of ruining the lives of people from all walks of life. Part 7 will give real-life examples of how the younger Nograles is trampling the lives of individuals and families.
Nograles has the temerity to ask depositors whose accounts cannot be validated due to incomplete documentation to run after their agents and solicitors. Nograles has the gall to advise powerless depositors to file non-litigable cases against non-banking people when the PDIC itself, after five months of forensic investigations, has not fined or charged any banking officer who they said had hidden pertinent bank records. Under PDIC’s charter, bank officials who refuse to surrender pertinent documents could be fined from P50,000 to P2 million and/or penalized a long jail sentence.
Nograles said missing bank documents could indicate the theft of depositors’ money by bank officials, or that missing records could also indicate the deposit claims were fictitious. Whatever it indicates, bank depositors are entitled to full compensation of their insured and legitimate deposits. Of the six so-called required documents, five of them are under the control of bank personnel. So even if a depositor has only one of them- the Certificate of Time Deposit or passbook- and matching proof of actual funds inflow, then PDIC is bound to return the money of the depositor. In a speech delivered before a joint meeting of the MAP, PCCI and the MBC on August 28, 2000 at the Hotel Intercontinental, then PDIC President Norberto Nazareno shared his experience with the closed Rural Bank of San Miguel (RBSM). As in the case of the legacy banks, Nazareno said that “anomalous accounts, splitting of deposits and the conversion of manager's checks into split accounts have hampered its [PDIC’s] audit and consolidation of the records leading to the delay in the servicing of insured deposits’ of RBSM depositors.” He said, "As we paid the depositors, they come with their certificate of time deposit but we see that is not recorded in the bank's records." He then admitted to having “to pay their insured deposits since the certificates were signed by authorized signatories, but only after they execute affidavits to support our cases against owners and/or managers.” This precedence underscores DEADBOL’s stand that missing documentation of bank records attended by fraud was not and should not be a reason nor an excuse for PDIC to avoid paying the valid claims of legitimate bank depositors holding official certificates of time deposits. If in 2000 the PDIC paid the RBSM depositors under such circumstances, there is no reason why the PDIC of today cannot pay the legacy depositors. Unless, of course, if the PDIC is illiquid and insolvent- which we have already established and proven.
In fact, the younger Nograles’ accusations of fraud and creation of fictitious accounts by legacy bank officers calls into play the well-established principle that records that would otherwise be conclusive evidence may be attacked as fraudulent. Depositors’ records (CTDs, passbooks, canceled checks) should be considered as evidence, as what PDIC’s Nazareno did with RBSM. Even the Federal Insurance Deposit Corp. of the USA recognizes form of documents which would be considered as conclusive proof, in the event of the liquidation of an FDIC-insured bank when the bank's records are either missing, incomplete, or incorrect. In a FIDC Advisory Opinion, the Assistant General Counsel wrote that in such cases “where the records of an insured bank differ from the records of the account holder, ... the FDIC will accept as conclusive the genuine, unaltered records of the account holder, maintained in good faith and in the ordinary course of business.” The UK’s Financial Services Compensation Scheme “give investors the chance to agree the balance of their own account before accepting payment, or ask them to submit any relevant documentary evidence where they believed a discrepancy existed which we would then investigate further.” PDIC, as an insurer, should not be allowed to escape paying the legitimate claims of depositors who relied on its statutory backing of their accounts and on the ability of their banks to fill out deposit records properly.
Nograles tested the heights of absurdity by claiming “The depositors and the PDIC are both victims here.” How could PDIC be a victim when it supervises banks, and can examine and investigate its records? How could it be a victim when it can fine erring bank officers and owners a maximum amount of P2 million? How could it be a victim when it has the legal power to impose prison mayor on banking personnel who violates its rules? PDIC has all these powers when a bank is operational and open to the public. Just imagine what it can do when the bank has closed and is placed under its total control, and yet Nograles has the audacity to preposterously claim that it is a victim, too.
There is no doubt that legacy bank depositors are victims of Celso de los Angeles and his banking minions. However, as events are shaping up, the legacy bank depositors are now being victimized once again, by the younger Nograles of PDIC. He is not only reneging on PDIC’s basic mission of protecting insured depositors, but his press releases and pronouncements seem to blame the legacy depositor for patronizing these banks. Blaming the victim is a common resort of the guilty. And Jose Nograles is certainly guilty. He is guilty of not acting on PDIC’s 2005 findings of anomalies and wrongdoings in the legacy banks. He is guilty of not continuing the examination of bank records to ensure accurate and complete recordkeeping as provided by the PDIC charter. He is guilty of not filing charges against legacy bank officers for hiding bank documents. He is guilty of not ensuring that the cash reserves of the DIF were enough to pay insured deposits of the legacy banks. He is guilty of not being able to borrow funds from the BSP to pay the insured legacy depositors. And because PDIC is insolvent, he is guilty of coming up with all kinds of excuses in order to unconscionably delay and avoid paying legitimate depositors. He is guilty of erosion of public confidence in the rural banking system. And soon, he will be guilty of ruining the lives of people from all walks of life. Part 7 will give real-life examples of how the younger Nograles is trampling the lives of individuals and families.
Saturday, May 16, 2009
The Legacy Bank Mess: Every Man for Himself (Part 5)
It took the BSP about two weeks to summarily reject PDIC’s loan request for P14 billion. The two weeks of deliberations were considered unusually long, given that in the past, the central bank normally decided on loan requests before deposit claims were paid out (PDIC had already started servicing savings accounts claims). The central bank must have had strong reasons to disapprove the loan from its erstwhile partner who needed to service the claims of tens of thousands of depositors of 12 nationwide banks when just five months ago, it had agreed to lend P3 billion to pay a few thousand depositors of one local bank.
Could one reason be political? It is a known fact that congressman Luis Villafuerte had failed in his campaign for the speakership of the House. Blogs have posited that the congressman used his wife, who sits in the Monetary Board (MB), to influence its unfavorable decision so as to embarrass Speaker Nograles, who has been identified as a legacy preneed depositor and rumored to be a legacy bank depositor. We have read newspaper articles reporting that congressmen, who had been persuaded by the speaker to put in money in the legacy banks, have threatened to unseat Nograles if they did not get their money back. They may have been assured by the speaker that his younger brother had their backs, guaranteeing immediate settlement of their deposits.
But it is improbable that Mrs. Villafuerte could by herself persuade her fellow board members to put its co-regulator in such an untenable situation unless there were more compelling arguments. And that justification would be prior knowledge: that the younger Nograles had known about the banking anomalies and irregularities unearthed during the 2005 BSP and PDIC investigations but had not acted on them. If the MB had considered the possibility of collusion and obstruction, then it would explain the otherwise inexplicable decision of the BSP to peremptorily turn down PDIC’s loan proposal. Now that we have established that BSP was completely cognizant of PDIC’s lack of liquidity by granting it a P3 billion loan late last year, BSP, if it really wanted to be of help, could have countered with a lesser loan amount, say half or P7 billion. However, it instead chose to turn its back on its erstwhile partner and leave PDIC literally holding the proverbial empty bag.
After more than 45 days of verifying the deposits of all the closed banks, the younger Nograles must have believed that he had enough data for him to go to the central bank and request for P14 billion. If the BSP had granted the loan, then PDIC would by now have paid most if not all of the legitimate deposits. However, the unexpected denial of its loan proposal has led Jose Nograles to likewise turn his back on Celso’s assurances of prompt payment to legacy bank depositors. Instead of doing his job of paying depositors as described by his older brother, the younger Nograles has done a 180 degree turnaround in an obvious attempt to preserve his job as PDIC president. It is now everyman for himself! He is now covering up his inexcusable negligence and dereliction by trying to impress to all and sundry that he is the protector of the DIF. He is now delaying, prolonging and avoiding payment to depositors, the very ones who are supposed to be protected and insured by PDIC and the DIF. When before he was complacent with the Celso de los Angeles, shareholders, silent partners and bank officers, he now acts as the vigilant guardian of the DIF, virtually accusing the depositors of conspiracy with Celso de los Angeles et al. He is blaming and pointing fingers to all and everyone except to himself.
His first move was to change the filing and claiming process. He now requires that a Special Power of Attorney (SPA) can only be executed if the original depositor is out of the country or medically incapacitated, contrary to common, legal, and traditional practice. One can buy or sell millions worth of property based on a notarized SPA for and in behalf of the vendee or the vendor who is healthy and lives next door, but to file for a P100,000 claim, it is disallowed by the PDIC. He now demands that minors 7 years old and above personally appear before PDIC claims officers and affix their signatures when common sense demands and actual banking practices do not require such. Because minors usually cannot sign their names, banks expect their parents or guardians to sign for them; however, PDIC demands that even 8 year olds sign the forms. He has floated the idea of mailing checks payments when everyone knows that postal fraud and malfeasance is not uncommon.
All of these modifications by PDIC of its own rules and practices are time-consuming and entails more costs to the depositors. However, these are inconveniences compared to the anxiety and consternation caused by his pronouncement that most accounts were doubtful because of missing bank records and discrepancies in recording done by accountable bank officers. This has caused bewilderment and trepidation among bank depositors who have no knowledge of banking procedures and certainly no control over what bank officers do or do not do with the funds deposited. What is important to a depositor is that he walks away from the bank with a duly signed and filled up certificate of deposit or passbook. Why is Nograles blaming the victim for acts of omissions and commissions done by the very people his organization the PDIC is supposed to supervise? Even if we already know the answer to that, how is Nograles going about blaming all others except himself and his agency? Part 6 hopes to derail this devious scheme of delaying and avoiding payment of legitimate deposits.
Could one reason be political? It is a known fact that congressman Luis Villafuerte had failed in his campaign for the speakership of the House. Blogs have posited that the congressman used his wife, who sits in the Monetary Board (MB), to influence its unfavorable decision so as to embarrass Speaker Nograles, who has been identified as a legacy preneed depositor and rumored to be a legacy bank depositor. We have read newspaper articles reporting that congressmen, who had been persuaded by the speaker to put in money in the legacy banks, have threatened to unseat Nograles if they did not get their money back. They may have been assured by the speaker that his younger brother had their backs, guaranteeing immediate settlement of their deposits.
But it is improbable that Mrs. Villafuerte could by herself persuade her fellow board members to put its co-regulator in such an untenable situation unless there were more compelling arguments. And that justification would be prior knowledge: that the younger Nograles had known about the banking anomalies and irregularities unearthed during the 2005 BSP and PDIC investigations but had not acted on them. If the MB had considered the possibility of collusion and obstruction, then it would explain the otherwise inexplicable decision of the BSP to peremptorily turn down PDIC’s loan proposal. Now that we have established that BSP was completely cognizant of PDIC’s lack of liquidity by granting it a P3 billion loan late last year, BSP, if it really wanted to be of help, could have countered with a lesser loan amount, say half or P7 billion. However, it instead chose to turn its back on its erstwhile partner and leave PDIC literally holding the proverbial empty bag.
After more than 45 days of verifying the deposits of all the closed banks, the younger Nograles must have believed that he had enough data for him to go to the central bank and request for P14 billion. If the BSP had granted the loan, then PDIC would by now have paid most if not all of the legitimate deposits. However, the unexpected denial of its loan proposal has led Jose Nograles to likewise turn his back on Celso’s assurances of prompt payment to legacy bank depositors. Instead of doing his job of paying depositors as described by his older brother, the younger Nograles has done a 180 degree turnaround in an obvious attempt to preserve his job as PDIC president. It is now everyman for himself! He is now covering up his inexcusable negligence and dereliction by trying to impress to all and sundry that he is the protector of the DIF. He is now delaying, prolonging and avoiding payment to depositors, the very ones who are supposed to be protected and insured by PDIC and the DIF. When before he was complacent with the Celso de los Angeles, shareholders, silent partners and bank officers, he now acts as the vigilant guardian of the DIF, virtually accusing the depositors of conspiracy with Celso de los Angeles et al. He is blaming and pointing fingers to all and everyone except to himself.
His first move was to change the filing and claiming process. He now requires that a Special Power of Attorney (SPA) can only be executed if the original depositor is out of the country or medically incapacitated, contrary to common, legal, and traditional practice. One can buy or sell millions worth of property based on a notarized SPA for and in behalf of the vendee or the vendor who is healthy and lives next door, but to file for a P100,000 claim, it is disallowed by the PDIC. He now demands that minors 7 years old and above personally appear before PDIC claims officers and affix their signatures when common sense demands and actual banking practices do not require such. Because minors usually cannot sign their names, banks expect their parents or guardians to sign for them; however, PDIC demands that even 8 year olds sign the forms. He has floated the idea of mailing checks payments when everyone knows that postal fraud and malfeasance is not uncommon.
All of these modifications by PDIC of its own rules and practices are time-consuming and entails more costs to the depositors. However, these are inconveniences compared to the anxiety and consternation caused by his pronouncement that most accounts were doubtful because of missing bank records and discrepancies in recording done by accountable bank officers. This has caused bewilderment and trepidation among bank depositors who have no knowledge of banking procedures and certainly no control over what bank officers do or do not do with the funds deposited. What is important to a depositor is that he walks away from the bank with a duly signed and filled up certificate of deposit or passbook. Why is Nograles blaming the victim for acts of omissions and commissions done by the very people his organization the PDIC is supposed to supervise? Even if we already know the answer to that, how is Nograles going about blaming all others except himself and his agency? Part 6 hopes to derail this devious scheme of delaying and avoiding payment of legitimate deposits.
Wednesday, May 13, 2009
The Legacy Bank Mess: A Parting of Partners (Part 4)
PDIC has a Deposit Insurance Fund (DIF) of 61 billion pesos but has outstanding obligations of P72.5 billion to the BSP. To the layman, it would seem that PDIC is bankrupt. And it may very well be, except for the assurance of Jose Nograles that "All [loans] are in current status and matched with identifiable repayment sources." Most people think that PDIC borrowed all this money from the BSP to supplement and replenish its DIF. It is not so. It is the BSP that initially grants emergency loans to distressed and troubled banks for a period of 90 days, extendable for another 90 days. If the bank is unable to pay these loans within the statutory 180 days, then these loans are transferred to the PDIC, which has less stringent requirements (PDIC accepts real estate properties as collateral). The loans turn into a PDIC assistance when the bank signs an agreement with the state insurer for a rehabilitation plan.
So why didn’t the BSP approve the legacy banks’ request for emergency loans? Because the BSP already knew that based on its (and PDIC'S) 2005 examination of the banks’ books, it did not have the required amount of government securities as collateral. So it allowed all 12 legacy banks to declare bank holidays, and then asked the PDIC to move in early December, 2008 and put the banks under receivership, which it did. Then, late January, 2009, PDIC exercised its charter that allows the insurer to borrow from the central bank to pay claims of depositors of banks placed under its receivership. On February, 2009, BSP disapproves the P14 billion loan request of the PDIC stating that PDIC “have more than enough (DIF) reserves to cover it (deposit claims).” But did it have even enough? Or the question should be, does PDIC have any reserves left?
In 2002, the BSP lent UCPB P25 billion in emergency loans. In 2003, PDIC paid out P8 billion in cash for the bank’s non-performing assets (NPAs). By 2005, PDIC still had P12 billion in loans to the bank. It was only in April, 2009 that PDIC approved the conversion of the P12 billion loan into equity with Nograles noting that the capital notes of PDIC will be converted into convertible preferred notes once the Supreme Court rules on the ownership issue of UCPB. Then in March, 2004, PDIC absorbed the P7.64 billion loan of Philipine Bank of Communications (PBCOM) and converted this into a soft 10-year term loan as part of its “financial enhancement package” where it only charged one percent in interest per year. The pact involves the eventual sale of 67 percent of the bank’s capital stock five years from the infusion of the financial package for the then-bleeding bank. PDIC has a lien on a substantial number of the bank shares: designed this way to make sure that PDIC will be protected in its financial rescue of P7.64 billion, clearly way above the buying offers for the bank’s shares. But now PDIC has a big headache in making its timetable to get its hands on its money it advanced to PBCom because the two warring major shareholders cannot resolve its disputes. In 2006, PDIC paid P3 billion for Export and Industry Bank’s NPAs and granted the bank a six-year term loan of P7 billion, paying PDIC an interest of one percent on the first year of availment and five percent on the next five years. EIB, in turn, used the P7 billion to purchase high-yielding government securities, which will be held in escrow for PDIC. PDIC has tied up P25.6 billion of its DIF as long-term loans and equity into the three banks. Add another 10 billion it paid in cash for the banks’ NPAs, and PDIC has sunk in P35.6 billion of DIF into the three banks.
It is not hard to imagine that it may have tied up the rest of the P61 billion DIF into other banks, considering that as of 2008, PDIC owed the central bank P72.5 billion. The BSP would have known the illiquid position of pdic and that is why in September, 2008, it approved a P3-billion loan for the PDIC to pay insured depositors of the padlocked G7 Bank, a seven-unit rural bank based in Bicol. “The BSP and PDIC are co-regulators. It’s our joint responsibility,” said PDIC president Jose Nograles, when asked about the new loan. But five months later, the BSP disapproved PDIC’s loan proposal that it needed to pay the depositors of 12 banks with more than a 100 branches located all over the country. The BSP maintained that PDIC had acquired “more than enough reserves” to pay P14 billion of insured deposits. PDIC nets about P6 billion cash a year in bank assessments and interest income, and it is therefore impossible for it to have accumulated P14 billion in five short months.
Why had BSP turned down an otherwise routine loan request? Why had it become PDIC’s sole responsibility, and not BSP’s co-responsibility? And faced with this unexpected rebuff and rejection, what is the younger Nograles saying and doing that is now endangering public confidence in pdic and the rural banking industry?
So why didn’t the BSP approve the legacy banks’ request for emergency loans? Because the BSP already knew that based on its (and PDIC'S) 2005 examination of the banks’ books, it did not have the required amount of government securities as collateral. So it allowed all 12 legacy banks to declare bank holidays, and then asked the PDIC to move in early December, 2008 and put the banks under receivership, which it did. Then, late January, 2009, PDIC exercised its charter that allows the insurer to borrow from the central bank to pay claims of depositors of banks placed under its receivership. On February, 2009, BSP disapproves the P14 billion loan request of the PDIC stating that PDIC “have more than enough (DIF) reserves to cover it (deposit claims).” But did it have even enough? Or the question should be, does PDIC have any reserves left?
In 2002, the BSP lent UCPB P25 billion in emergency loans. In 2003, PDIC paid out P8 billion in cash for the bank’s non-performing assets (NPAs). By 2005, PDIC still had P12 billion in loans to the bank. It was only in April, 2009 that PDIC approved the conversion of the P12 billion loan into equity with Nograles noting that the capital notes of PDIC will be converted into convertible preferred notes once the Supreme Court rules on the ownership issue of UCPB. Then in March, 2004, PDIC absorbed the P7.64 billion loan of Philipine Bank of Communications (PBCOM) and converted this into a soft 10-year term loan as part of its “financial enhancement package” where it only charged one percent in interest per year. The pact involves the eventual sale of 67 percent of the bank’s capital stock five years from the infusion of the financial package for the then-bleeding bank. PDIC has a lien on a substantial number of the bank shares: designed this way to make sure that PDIC will be protected in its financial rescue of P7.64 billion, clearly way above the buying offers for the bank’s shares. But now PDIC has a big headache in making its timetable to get its hands on its money it advanced to PBCom because the two warring major shareholders cannot resolve its disputes. In 2006, PDIC paid P3 billion for Export and Industry Bank’s NPAs and granted the bank a six-year term loan of P7 billion, paying PDIC an interest of one percent on the first year of availment and five percent on the next five years. EIB, in turn, used the P7 billion to purchase high-yielding government securities, which will be held in escrow for PDIC. PDIC has tied up P25.6 billion of its DIF as long-term loans and equity into the three banks. Add another 10 billion it paid in cash for the banks’ NPAs, and PDIC has sunk in P35.6 billion of DIF into the three banks.
It is not hard to imagine that it may have tied up the rest of the P61 billion DIF into other banks, considering that as of 2008, PDIC owed the central bank P72.5 billion. The BSP would have known the illiquid position of pdic and that is why in September, 2008, it approved a P3-billion loan for the PDIC to pay insured depositors of the padlocked G7 Bank, a seven-unit rural bank based in Bicol. “The BSP and PDIC are co-regulators. It’s our joint responsibility,” said PDIC president Jose Nograles, when asked about the new loan. But five months later, the BSP disapproved PDIC’s loan proposal that it needed to pay the depositors of 12 banks with more than a 100 branches located all over the country. The BSP maintained that PDIC had acquired “more than enough reserves” to pay P14 billion of insured deposits. PDIC nets about P6 billion cash a year in bank assessments and interest income, and it is therefore impossible for it to have accumulated P14 billion in five short months.
Why had BSP turned down an otherwise routine loan request? Why had it become PDIC’s sole responsibility, and not BSP’s co-responsibility? And faced with this unexpected rebuff and rejection, what is the younger Nograles saying and doing that is now endangering public confidence in pdic and the rural banking industry?
Friday, May 1, 2009
The Legacy Bank Mess: Half-truths are Whole Lies (Part 2)
George Orwell wrote that “We have now sunk to a depth at which the restatement of the obvious is the first duty of intelligent men.” Ordinary depositors who are alarmed and dismayed by the actions and actuations of PDIC formed a group called DEADBOL (Depositors Enabling All Depositors of Banks of Legacy,). The members call on PDIC to fulfill its overall mandate of protecting depositors. The group demands that PDIC performs its own published mission of adopting “responsive resolution methods” and ensuring “prompt settlement of insured deposit.” So far, five months have passed since the closure of legacy banks, and depositors, who had put their faith in PDIC, are starting to believe and realize that PDIC does not intend to honor its obligations to its insured depositors. PDIC is spouting a lot of half-truths so as to condition the public and we now see that it is DEADBOL’s duty to expose these irresponsible statements of commission or omission, and restate the truth.
Congressmen, senators, and media have the mistaken notion that PDIC is funded by people’s money; PDIC is content for reasons of its own not to disabuse them of this misinformation. PDIC is a government agency that administers a fund that does not use taxpayer’s money. Except for the initial seed money of P3 billion pesos from the government, the Deposit Insurance Fund (DIF) is basically funded from premiums paid by all operating banks. You can be sure that the banks have found out a way to pass on these assessments to the depositors who absorb these hidden costs. To characterize the DIF, which has grown to more than P61 billion pesos, as government funds is a half-truth. That is like saying that SSS and GSIS funds are also owned by the government. Fortunately, the truth is that these funds are private funds but unfortunately, managed by government officials who are driven by dark motives and hidden interests.
On February 9, 2009, PDIC came out with a press release that it is “prioritizing the claims of depositors with regular savings accounts of P100,000 and below in keeping with the state deposit insurer’s mandate to protect small, unsophisticated depositors. “ Nograles further qualified this half-truth by saying that “in keeping with the PDIC’s mandate to protect the small, unsophisticated depositors” and that “stopping the payouts as some quarters have suggested will be prejudicial to small depositors who have valid deposit insurance claims.” Nowhere in the PDIC charter can one find the words “small” and “unsophisticated” but the PDIC president used both words to describe a depositor that his organization is supposed to protect. Now that the maximum insurance coverage is P500,000 per account, will Jose Nograles in servicing future claims say that a 100,000 pesos and below account represents a small depositor; P250,000, medium; and P500,000, big? Does having a small deposit make you an unsophisticated depositor? Where is Nograles getting his lexicon? Yes, we recall Senator Mar Roxas, during a senate hearing on the legacy mess, first using the words sophisticated and unsophisticated to describe both bank depositors and preneed investors. And the younger Nograles latched on to these words, as if to ingratiate himself with the legislative investigators. Labeling is a cognitive distortion which can lead to logical fallacies.
The truth is that the pdic is chartered “to promote and safeguard the interests of the depositing public by way of providing permanent and continuing insurance coverage on all insured deposits,” regardless of the size of the deposit but up to the statutory insurance coverage per account. It is a fact that this is the first time that PDIC has differentiated and prioritized claims according to the size of the account.
In congressional and senate hearings, Deputy Governor Espenilla, Jr. said that the BSP began investigating the Legacy banks as early as 2005. When a congressman asked Nograles why hadn’t PDIC earlier conducted its own investigation of the legacy banks, we heard Nograles mumble that due to bank secrecy laws, PDIC could only examine individual bank accounts only after a bank has been placed under receivership. This is a half-truth. BSP Governor Tetangco, Jr. in a August, 2005 speech to a financial forum says that he is “happy to report ……, our partnership with local financial regulators (SEC, IC and PDIC), is now fully operational with major projects currently underway. These projects include conglomerate mapping, information sharing, joint examination arrangements, rules harmonization and financial literacy.” The PDIC Forum 2004 proudly announced that RA 9302, the Amended PDIC Charter signed into law on July, 2004, enhanced “PDIC’s capability to minimize risks to the DIF by reinstating its authority to examine banks subject to prior approval of the Monetary Board” and investigate complaints related to unsafe and unsound banking practices. The PDIC newsletter trumpeted that this authority will fortify the financial sytem’s safety net by “allowing prompt remedial intervention.” Dictionaries define prompt as “performed with little or no delay” and remedial as “tending to improve or rectify.” Given then PDIC’s enhanced examination powers, did PDIC examine the books of the banks before the banks actually closed? And if it did, did it delay intervention until it was too late? Part 3 will attempt to provide answers to these burning questions.
Congressmen, senators, and media have the mistaken notion that PDIC is funded by people’s money; PDIC is content for reasons of its own not to disabuse them of this misinformation. PDIC is a government agency that administers a fund that does not use taxpayer’s money. Except for the initial seed money of P3 billion pesos from the government, the Deposit Insurance Fund (DIF) is basically funded from premiums paid by all operating banks. You can be sure that the banks have found out a way to pass on these assessments to the depositors who absorb these hidden costs. To characterize the DIF, which has grown to more than P61 billion pesos, as government funds is a half-truth. That is like saying that SSS and GSIS funds are also owned by the government. Fortunately, the truth is that these funds are private funds but unfortunately, managed by government officials who are driven by dark motives and hidden interests.
On February 9, 2009, PDIC came out with a press release that it is “prioritizing the claims of depositors with regular savings accounts of P100,000 and below in keeping with the state deposit insurer’s mandate to protect small, unsophisticated depositors. “ Nograles further qualified this half-truth by saying that “in keeping with the PDIC’s mandate to protect the small, unsophisticated depositors” and that “stopping the payouts as some quarters have suggested will be prejudicial to small depositors who have valid deposit insurance claims.” Nowhere in the PDIC charter can one find the words “small” and “unsophisticated” but the PDIC president used both words to describe a depositor that his organization is supposed to protect. Now that the maximum insurance coverage is P500,000 per account, will Jose Nograles in servicing future claims say that a 100,000 pesos and below account represents a small depositor; P250,000, medium; and P500,000, big? Does having a small deposit make you an unsophisticated depositor? Where is Nograles getting his lexicon? Yes, we recall Senator Mar Roxas, during a senate hearing on the legacy mess, first using the words sophisticated and unsophisticated to describe both bank depositors and preneed investors. And the younger Nograles latched on to these words, as if to ingratiate himself with the legislative investigators. Labeling is a cognitive distortion which can lead to logical fallacies.
The truth is that the pdic is chartered “to promote and safeguard the interests of the depositing public by way of providing permanent and continuing insurance coverage on all insured deposits,” regardless of the size of the deposit but up to the statutory insurance coverage per account. It is a fact that this is the first time that PDIC has differentiated and prioritized claims according to the size of the account.
In congressional and senate hearings, Deputy Governor Espenilla, Jr. said that the BSP began investigating the Legacy banks as early as 2005. When a congressman asked Nograles why hadn’t PDIC earlier conducted its own investigation of the legacy banks, we heard Nograles mumble that due to bank secrecy laws, PDIC could only examine individual bank accounts only after a bank has been placed under receivership. This is a half-truth. BSP Governor Tetangco, Jr. in a August, 2005 speech to a financial forum says that he is “happy to report ……, our partnership with local financial regulators (SEC, IC and PDIC), is now fully operational with major projects currently underway. These projects include conglomerate mapping, information sharing, joint examination arrangements, rules harmonization and financial literacy.” The PDIC Forum 2004 proudly announced that RA 9302, the Amended PDIC Charter signed into law on July, 2004, enhanced “PDIC’s capability to minimize risks to the DIF by reinstating its authority to examine banks subject to prior approval of the Monetary Board” and investigate complaints related to unsafe and unsound banking practices. The PDIC newsletter trumpeted that this authority will fortify the financial sytem’s safety net by “allowing prompt remedial intervention.” Dictionaries define prompt as “performed with little or no delay” and remedial as “tending to improve or rectify.” Given then PDIC’s enhanced examination powers, did PDIC examine the books of the banks before the banks actually closed? And if it did, did it delay intervention until it was too late? Part 3 will attempt to provide answers to these burning questions.
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