House might look into closure of rural banks

CEBU - The House Committee on Banks and Financial Intermediaries is looking into the possibility of conducting an investigation into the closure of the seven rural banks under the Legacy Group.

The chairman of the committee, Rep. Jaime Lopez of the 2nd District of Manila, called an emergency meeting last night to discuss the possible congressional investigation.

Lopez said he wanted to make sure that his committee will not be used by people, who may have personal interests before finally coming up a decision whether or not an investigation in aid of legislation will be conducted.

Should the committee decide to look into it, Lopez said they will investigate possible negligence on the part of the Bangko Sentral ng Pilipinas to supervise the banks under the Legacy Group.

The report of the Bangko Sentral ng Pilipinas revealed that the seven banks under the Legacy Group that declared a holiday have been irregularly operating.

The Central Bank found out that these banks have been granting loans without collateral and proper documentation.

It was also noted that the funds of these banks was used to pay the obligations of the other companies, especially the pre-need firms under the Legacy Group.

The seven banks padlocked by the BSP and were placed under the receivership of the Philippine Deposits Insurance Corporation were First Interstate Bank in Tacloban; Bank of East Asia in Cebu; Philippine Countryside Rural Bank in Cebu; Rural Bank of Parañaque; Rural Bank of Bais in Negros Oriental; Pilipino Rural Bank in Cebu; Rural Bank of San Jose in Batangas; and Rural Bank of Nueva Caceres in Naga City, Camarines Sur. Lopez admitted in an interview over radio station dyLA yesterday that the incident deserves to be investigated.

It was observed that the BSP already knew the financial status of these banks since last year, but they were allowed to continue operating despite the problem until it finally the banks declared a bank holiday last week.

In fact, Chuchi Fonacier, director of the Integrated Supervision Department of the BSP, sent a memorandum to the Monetary Board that as of July 31, 2007 and on September 30, 2008 one of these banks has already insufficient realizable assets to meet liabilities. — Fred P. Languido/NLQ