By Michelle Remo
Philippine Daily Inquirer
First Posted 19:30:00 08/30/2009

Filed Under: Banking

philippine deposit insurance Corp. wants owners of a failed bank barred from participating in biddings aimed at selling the closed financial institution.

The deposit insurer is also proposing that it be allowed to sell a bank placed under receivership even without the consent of the owners.

Pdic wants its proposals to be part of the bill seeking to amend the charter of the Bangko Sentral ng Pilipinas that is pending in Congress. The bill was earlier certified as urgent by President Macapagal-Arroyo.

Pdic president Jose Nograles told the Inquirer that under current rules, owners of a failed bank may still participate in biddings organized by Pdic.

“What we want is to disallow them from buying back their bank,” Nograles said. He said it was not prudent to allow old owners to buy back a failed bank, stressing this must already be run by people who are likely to manage it better.

Nograles also said that currently, Pdic is required to seek permission of the owners of a failed bank before it can sell the company. He said this hampers the process of the sale and efforts of the regulator to improve the overall health of the banking industry.

Pdic is the government agency mandated to settle claims of depositors of failed banks. Together with this mandate is its oversight function of the banking industry together with the Bangko Sentral ng Pilipinas.

Pdic wants the two proposals included as provisions of the bill seeking to amend the bsp charter. A law amending the charter of Pdic was passed earlier this year, but it failed to include provisions on the two proposals of Pdic.

Nograles said some congressmen did not approve of the Pdic proposals and the agency was hopeful these would be included in the bill seeking to amend the bsp’s charter.

The bsp has been pushing for amendments to its charter. One of the provisions in the proposed bill would allow the central bank to buy and sell its own bonds. The bsp said that being allowed to trade its own bonds was needed so that it could better manage liquidity in the economy. Monetary officials said the bsp was the only central bank in the world that was not allowed to trade its own bonds.

The bsp also wants its examiners exempted from the Deposit Secrecy Law. Monetary officials said the inability of central bank examiners to check on bank deposits hamper its efforts to immediately trace unsafe and unsound banking practices and to detect money laundering activities.

The central bank also wants its officials and concerned employees immune from legal suits arising from decisions to close banks. The bsp said its moves to close banks believed to be involved in unscrupulous transactions were sometimes being hampered by legal suits filed by the owners.

For instance, it said rural banks owned by the Legacy Group were supposed to have been closed much earlier were it not for a court-issued temporary restraining order. The banks were closed late last year following the decision of the Supreme Court to lift the TRO, but the involved rural banks were able to solicit more deposits from the public during the effectivity of the court restraining order.