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Cebu City, Philippines - Joven Ponce opened an account with the Philippine Countryside Rural Bank Inc. (PCRBI) in Liloan town, northern Cebu, in 2005 to secure the future of his three children.
On Tuesday, he was shocked to learn that the PCRB declared a “bank holiday.”
There was no notice or explanation given by bank officials for the closed doors.
Ponce, a contractual worker from barangay Yati in Liloan, tried calling bank officials to get the real score.
But he could not find anyone to face him.
“Naa lagi niingon nako nga nisira kuno kay bankrupt, mao to nitawag ko pero wala man (Somebody told me that the bank closed because of bankruptcy. so I called up but no one answered),” Ponce said.
Thousands of bank clients were left in the dark wondering about their deposits when the PCRBI declared a bank holiday in its five branches in Cebu province.
The branches are located in the cities of Lapu-Lapu, Mandaue and Cebu, and towns of Consolacion town and Liloan.
Its sister company, Pilipino Rural Bank Inc. (PRBI), also declared a bank holiday on Monday.
Affected were its two branches in Mandaue City and Argao town, both in Cebu, and in Tagbilaran City, Bohol.
A bank holiday is a temporary bank closure which happens when a bank does not have sufficient money to conduct normal business transactions.
The temporary closure affects more than 2,000 clients of PCRBI and PRBI. These are mostly micro and small business owners, retirees and overseas Filipino workers.
Both PCRBI and PRBI are part of the Legacy group, a conglomerate of rural banks and pre-need companies.
The Inquirer reported earlier that the Bangko Sentral ng Pilipinas (BSP) found the PCRBI and the PRBI, along with seven other banks under the Legacy group, to be undercapitalized during an audit done on July 31, 2007.
Depositors are in a quandary where to go.
Nobody was answering phone calls in the PCRBI branches in Cebu on Tuesday.
A text message sent to the local media was the management’s only official statement.
“The management is working with the regulators to bring operation back to normal,” PCRB president Gary Cando said in a text message.
The BSP said it would send bank examiners to Cebu to check on the situation. It was not clear as of press time whether the bank notified the BSP earlier of its decision.
Marie Kristine Pajarillo, bank officer 2 of the BSP's Financial Consumer Affairs Group, told Cebu Daily News that they were still verifying if there was an official notification from the bank to the BSP.
“Because the bank declared it, we will take appropriate action. We still did not receive report about it (bank holiday). We will get the details and will act accordingly,” said Virgilio Sarmiento, BSP manager of integrated supervisory department.
Other banks under the Legacy group which were found by the BSP to be undercapitalized included Rural Bank of Parañaque Inc., Rural Bank of San Jose (Batangas) Inc., Rural Bank of Carmen (Cebu) Inc., Rural Bank of Calatagan (Batangas) Inc. (now Dynamic Rural Bank), Rural Bank of DARBCI Inc., Rural Bank of Kananga (Leyte) Inc. (now First Interstate Rural Bank) and Rural Bank of Bisayas Minglanilla (now Bank of East Asia).
According to the BSP, the rural banks under the Legacy group have a capital deficiency of P2.5 billion that ranged from P1.4 million for Dynamic Bank to P983.5 million for the Rural Bank of Parañaque.
The BSP recommended that the Legacy group banks be placed under receivership but the banks sought the issuance of a temporary restraining order to stop the BSP from implementing its planned takeover.
Manila Regional Trial Court Judge Nina Antonio-Valenzuela, in her June 4 order, issued a temporary restraining order, which prevented the BSP from acting on the findings of its examiners or even submitting reports to the Monetary Board, which in effect, prevented the regulator from closing the insolvent banks.
However, the Supreme Court issued early this month a TRO on the enforcement of the lower court's rulings that would enable the BSP to act on its adverse findings of the banking institutions.
Antonio Wycoco, vice president and marketing division head of Legacy Group's pre-need insurance company, said his company has been undergoing a rehabilitation plan.
Wycoco said Legacy's pre-need company has been offering another savings scheme that would double the money of investors within three years, with the interest payable in checks. He said their investment product was entirely different from that of the group's banking division.
Wycoco said the Legacy management requested a two-month moratorium on all interest and principal investment payments starting last November.
However, since both companies were in financial trouble, the group's assets may be used in paying out investments and liabilities.
If rehabilitation efforts fall through, Wycoco said the management of Legacy may apply for dissolution with the Securities and Exchange Commission (SEC).
“The company already discussed the possibility that if the company could not rehabilitate, then the most likely step would be to return the investors' capital by applying for dissolution,” he said.
When a company is dissolved, its assets will be liquidated to pay investors. Wycoco warned, however, that the process would take time. /With a report from Inquirer and Correspondents Jhunnex Napallacan and Carine M. Asutilla
