Monetary Board orders Rural Bank of Loreto shut
THE CENTRAL BANK has shuttered a rural bank in the Dinagat Islands, marking the first to be ordered closed this year.
In a statement, the Philippine Deposit Insurance Corp. (PDIC) announced that it has taken over the operations of the Rural Bank of Loreto, Inc. yesterday.
This follows the decision of the Monetary Board — the highest policy-setting body of the Bangko Sentral ng Pilipinas (BSP) — to shut down the lender’s operations through an order issued on Feb. 9. As regulator of the local banking system, the central bank can close down banks found unviable to remain in business.
The Rural Bank of Loreto operates four offices around Dinagat Islands in Surigao del Norte. Its head office is located in San Jose town, while three other units are in the municipalities of Cagdianao, Libjo (Albor) and Loreto.
The provincial lender holds P5.95 million of deposits, which is spread across 2,264 deposit accounts. Nearly all deposits are covered by deposit insurance at P5.94 million, the PDIC said.
Bank deposits are insured up to P500,000 per account, according to the law.
Under the PDIC charter, the state insurer steps in as receiver of problem banks and acquires the lender’s assets in order to pay outstanding liabilities to depositors. Upon assuming the assets, PDIC usually conducts public biddings to dispose these properties and raise funds which it will then use to settle outstanding deposits.
The PDIC is looking to auction off at least P157 million worth of properties this month through three separate auctions to be held in Metro Manila and Davao, which include residential, commercial and agricultural lots.
The insurer raised a total of P259.16 million in 2017 from selling the assets incurred from closed banks, as well as corporate properties. Properties worth P201.08 million raised premiums worth P58.08 million, the PDIC said.
The central bank ordered the closure of six rural banks and one thrift bank last year. In 2016, the regulator closed 22 lenders.
The BSP, PDIC, and the Land Bank of the Philippines have extended the Consolidation Program for Rural Banks until 2019, as they seek to promote mergers among rural lenders based in one province or region. These mergers are seen to fortify the capital and asset base of the lenders, making them more liquid and financially sound.