The Market Monitor Minding the Nation's Business
President Aquino needs to look into what looks like Philippine Deposit Insurance Corp. (PDIC) shenanigans as the policy wonks at the government bank receiver have displayed a remarkable difference in their handling of shuttered banks or those with huge government bailouts. The President, who has a firm grasp of economics, needs to ask just a few questions from the officials at PDIC and he would surely discover how the government financial agency has taken one route and then an opposite one for banks that have the same problems.
Surely, transparency and governance should not be thrown out the window on such delicate matters as preserving a bank’s assets. Unfortunately, the President would discover unbelievable PDIC somersaults in policy.
As the PDIC plays a very crucial role in the affairs of the country›s banking system, it owes the Filipino taxpayers straightforward and honest-to-goodness answers to the following crucial questions. And these are just a few of the questions that the President could ask of PDIC officials.
1. How does it define “insolvency” and “illiquidity”?
2. How can it justify lending Filipino taxpayers P7.6-billion monies to the illiquid Philippine Bank of Communications, on one hand, and recommend to the Monetary Board to liquidate the similarly illiquid Unitrust Development Bank (UDB), on the other hand?
3. Are there any laws, jurisprudence, and rules that allow the liquidation of illiquid but still solvent banks? If so, why was the PBCom exempted from these laws?
4. What other banks have been exempted from these laws and also extended loans? What are their outstanding loans from the PDIC?
5. How can the PDIC justify charging their officials’ additional salaries, productivity incentive bonuses, mid-year bonuses, Christmas bonuses, maternity allowances, dependents allowances, clothing allowances, rice subsidies, PERA, COLA, insurance premiums from the UDB that go against the double-compensation rule prohibited in the 1987 Constitution.
6. If, from the UDB alone, the PDIC has charged these prohibited double compensations worth approximately P34 million, how much have they charged all other banks under their receivership?
The President can look into the PDIC goings-on since there are apparently civic-spirited employees there who cannot stomach the strange deviation in policy of the government financial agency. These same people have been instrumental in letting the UDB know about the real state of affairs of the closed bank.
Thus, bank shareholder Francis Yuseco was able to get a glimpse of the strange goings-on, from the charging even of legal fees against the closed bank’s assets to the net capital of P153 million of Unitrust, which was diametrically opposite that of the supposed PDIC findings that the bank is illiquid.
Why should PDIC fritter away the assets of Unitrust when its clear mandate is to preserve the assets to allow for its eventual rehabilitation by way of merging it with a bank or letting it reopen.
That is one question that the shareholders of Unitrust, principally Yuseco, have been trying to get answers to, especially since the very same organic personnel of PDIC have been supplying him with PDIC papers related to Unitrust’s case.
As for the unanswered question on how much in bailout cash has been funneled to banks that sought financial refuge due to liquidity problems, that is what the President should pointedly ask the present PDIC boss especially, given the additional material that Yuseco has gathered relative to the dividends that PDIC should be giving to the government.
There have been so many instances when banks that were later merged with bigger banks had their financial bailouts going to the acquiring bank. Who now shoulders the cost of the financial bailout. The PDIC has not been as transparent as it should regarding the matter, although it is something that should be viewed with utmost import since it came from taxpayers’ money.
One big question that should not be lost on the PDIC affair is the case of shuttered rural banks . How much in salaries and other emoluments have PDIC officials charged against the assets of these banks and were these reported in the PDIC books?
And should Mr. Aquino desire to really look at the state of affairs of PDIC, he must start asking questions on the insurance premiums that banks pay so that in the event of a bank closure, the depositors can get their money up to P500,000. PNoy can ferret out many unanswered questions about the goings-on at PDIC.
The PDIC is clearly outside the constraints of not only the law but its own authority. This is clearly an abuse of power at the expense of this Bank and its investors.
If the Philippines wants to attract foreign investors its institutions must be held accountable to financial norms and regulations. This case should of be dealt with 10 years ago and dismissed as a fraudulent attempt by the PDIC to throw its weight around. As a foreign investor I am very concern that this has not had a senate hearing and PDIC dealt with accordingly. If this can happen to this bank is an bank safe from the PDIC.