LBC Bank’s issues isolated, bankers assure

Tuesday, September 13, 2011

CLOSED doors in branches of the LBC Development Bank (LBC Bank) upset depositors yesterday, the first banking day since it was placed under receivership of the Philippine Deposit Insurance Corp. (PDIC).

But the bank’s liquidity problems do not reflect on the entire banking industry’s condition, assured officials of the Cebu Bankers’ Club (CBC).

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“The banking sector is still generally liquid and with strong fundamentals that have continued to remain stable, despite the financial problem of the Western countries.

The recent problem of the LBC Bank is an isolated case and is not reflective of the banking industry’s financial condition,” said CBC past president Chito Cabaero of Metrobank Philippines.

LBC Bank, a thrift bank owned by the LBC Group, was placed under receivership of the PDIC last Sept. 9. PDIC assured depositors all valid accounts and deposit insurance claims will be paid as soon as possible.  

The Monetary Board places a bank under PDIC receivership when it no longer has enough assets to service withdrawals, Cabaero explained. PDIC will then gather and verify all bank records and preserve assets, for the benefit of creditors and depositors.

In Cebu City, Eleuterio and Elsa Lamberte were dismayed upon learning they could not withdraw from LBC Bank, which they needed for their child’s medication.

“Nagtuo mi nga maayo sila kay LBC gud. Wa namo damha (We thought they were doing well
because we trust the LBC brand. We didn’t see this coming),” Eleuterio said in a TV Patrol Central Visayas report.

According to PDIC, the latest available records show the bank has 321,516 deposit accounts, of which 99.4 percent are fully covered by deposit insurance.

“The placing of the LBC Bank under PDIC affects depositors but not the banking industry in general. In fact, it was the last resort to protect its depositors and other creditors or the general public as a whole. We recognize the efforts of the Bangko Sentral ng Pilipinas (BSP) to maintain a very stable and strong banking industry, which is considered the backbone of the country’s strong economy,” said CBC trustee Prudencio Gesta of Rizal Commercial Banking Corp.

Diligence

Cabaero added there is no cause for alarm in the country’s banking industry. However, the public should be cautious in choosing which bank to entrust their money with.

Look at the financial background of the bank, he suggested. Check on the bank’s ownership, history and credibility. Examine its financial stability, which can be seen in the bank’s annual report or website.

“If the bank offers out-of-this-world interest rates, then that is something the depositors or the public should validate,” Cabaero said.

LBC Bank has 19 branches nationwide. Its head office is located on JP Rizal St. in Makati City.

Depositors

As of June 30, the bank had an estimated total deposit liability of P6.09 billion.

A report posted in the BSP website showed that as of December 2010, LBC Bank had P6.39 billion in total assets and P5.8 billion in total liabilities. It had about P316 million in non-performing loans.

PDC yesterday said it will announce the payout as soon as possible. Updates will be posted at bank sites and the PDIC website, www.pdic.gov.ph.

PDIC also said they are arranging depositors’ fora at the bank’s head office and all its 19 branches. During the fora, PDIC will explain procedures and requirements in filing claims and answer depositors’ queries.

Under PDIC’s charter, deposits of P500,000 or below are fully covered by insurance.

Deposits in excess of the amount may or may not be paid, depending on the amount raised from the liquidation of a closed bank’s assets.

Depositors whose accounts are P10,000 or below need not apply for insurance claims. PDIC will mail notices to them, so they can withdraw from designated redemption offices like the Land Bank of the Philippines branches.