President Arroyo signed Wednesday the amendments to the charter of the Philippine Deposit Insurance Corp. (PDIC) to raise the insurance coverage of bank deposits from P250,000 to P500,000.
Mrs. Arroyo said the amendments to the PDIC charter are part of reforms designed to increase protection of bank deposits and consequently increase the confidence of the public in the banking system.
In October last year, Mrs. Arroyo approved a proposal to increase the deposit insurance coverage of bank deposits to deter mass withdrawals by depositors amid the global financial crisis.
The original proposal was to increase the maximum deposit insurance coverage from P250,000 to P1 million, but Congress trimmed the new maximum insurance coverage to P500,000.
Mrs. Arroyo led the ceremonial signing of the amendments to the PDIC charter at the sidelines of the Philippine Economic Zone Authority (PEZA) Investors’ Recognition Night at the World Trade Center (WTC) in Pasay City.
Among those who witnessed the signing ceremony were Finance Secretary Margarito Teves, Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr., Trade Secretary Peter Favila, PDIC president Jose C. Nograles and the principal sponsors of the amendments Sen. Edgardo Angara and Manila Rep. Jaime Lopez.
The Department of Budget and Management (DBM) earlier said the additional capital requested by PDIC to cover for the increase in the maximum insurance coverage is available.
The Chief Executive said the new legislation is expected to will contribute much to a strong banking system, which is an important requisite if the nation is to weather the global recession.
MANILA, Philippines—The crisis that has pushed the American financial system to the brink of disaster is spawning its own moral economy. The new object of fixation is blame-worthiness, rather than credit-worthiness.
The high-flying executives on Wall Street who invented those ingenious financial instruments known as “derivatives” are being singled out for special flogging. Not too long ago, they were the celebrated and highly compensated geniuses of the US economy. Today, there is not a corner in hell that seems punitive enough for them, no penalty that can conceivably equal the magnitude of their greed and recklessness.
But this blame game is ultimately a futile exercise. It’s like blaming culture for the way people are. It may be morally gratifying, and perhaps even politically unavoidable. But it brings Americans no closer to understanding the complexity of their highly-leveraged economy. Credit is not just the lifeblood of the US economy; it is its heart and soul. It is the only way Americans do business. In such an economy, one’s credit record is all that is needed to open doors. It is the center of gravity of one’s identity in the larger society.
A foreigner visiting the United States for the first time will not fail to note the centrality of credit in everyday transactions. Hardly anyone pays with cash, except for the smallest purchases. If someone forks out a hundred dollar bill to pay for a cup of coffee, as Filipino tourists are sometimes wont to do, the cashier will likely take a second look at him and at his money. In this economy, the use of a credit card or even a check to pay for a meal at McDonald’s is the most normal thing in the world.
In hierarchical Philippine society, we measure a person’s worth by his family background, his educational attainment, his profession, his connections, and his visible wealth. In less hierarchical America, a person’s worth is roughly equivalent to what he can borrow from a bank, or how much he can buy on credit. It is one’s credit standing that matters; it is the measure of almost everything else that is regarded as valuable. It attests to a person’s capacity to pay back, which is all that is important. If one habitually pays with cash, there is no way he can build a credit history, the most important basis of economic identity, and one’s principal claim to citizenship in the market.
Credit cards and housing loans are the two most important indices of the average American’s economic standing. It is fairly easy to get a credit card, but also quite easy to lose it if you do not meet the minimum monthly payments. But housing loans used to be different — a steady and adequate income was required to access them. It wasn’t until the early 1990s that the dream of owning a house became possible for almost every American family, notably for those whose incomes did not normally qualify them for such loans. Thus were subprime mortgages born. They were hailed as democratic, rather than devious; equitable rather than exploitative.
It was the time of the economic bubble. Banks and other financial institutions were awash with money that needed to make more money. And so they started giving out loans with little regard for the risks of not being paid back. They were focused on interest payments. Borrowers who were enticed with initially low interest payments found themselves trapped in schemes that carried adjustable interest rates and high penalties for pre-payment. But the spiraling housing demand drove prices through the roof and gave homeowners the assurance that what they were paying out was more than offset by the rising market value of their homes.
It is an aspect of the inventiveness of finance capitalism that when the subprime housing mortgages began to turn sour, the investment houses, instead of being alarmed, bundled these mortgages with credit card debts and sold them as mortgaged-back securities. There was a time when responsible borrowers, still the majority, were seduced with offers to re-finance their mortgages. This meant borrowing more money against the equity they already paid, money they could use to upgrade to a bigger home, or to buy a new car or go on an expensive holiday. These were offers that were too good to ignore, and they were perfectly consistent with the entire logic of the American way of life.
I remember how my US-based sisters and their husbands carefully calculated the benefits of having money to invest in the Philippines against the risks of refinancing under new adjustable repayment terms. They were not alone. Many Filipinos took the money and bought properties in the Philippines, instead of moving into a bigger home or buying an additional car. But many others were not as conservative. The more access they had to borrowed money, the freer their spending habits became. Surely, they must accept some blame, and they are paying for it. But it’s not entirely their fault. They are after all only a small part of a system that has created a reality so complex that it spins one contingent state after another, rendering its self-stabilizing operations totally useless. It is an amazing time.
One good thing that I see in all this for us in the Philippines is that it will finally put a stop, hopefully permanently, to local banks’ annoying practice of issuing unsolicited credit cards in order to spur credit spending. A consumerist culture driven by credit is the last thing we need in these times.
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PARIS—Key developments on Friday in the world credit crisis:
• Markets wait on news of a new vote in the US Congress, where Representatives are to consider a new version of a $700-billion (Є500-billion) bailout plan.
• The European Central Bank renews loans of $50 billion (Є36 billion) to commercial banks in what has become a regular effort to keep cash flowing on distressed interbank money markets.
• Trading on Russia’s main stock market is suspended after stocks plunge ahead of the vital vote by US lawmakers.
• European stocks edge higher, despite steep losses in Asia where Tokyo matched Wall Street by striking a three-year low.
• Switzerland’s biggest bank UBS says it will cut 2,000 more jobs as it repositions its investment bank which had been blamed for massive asset write-downs after the US subprime crisis.
• The Bank of Japan says it injected a further ¥800 billion ($7.6 billion) into the financial system as it tries to keep cash flowing.
• The chief executive of troubled Franco-Belgian bank Dexia says he will forgo a “golden parachute” payoff after resigning following a government bailout.
• The US bank Wells Fargo agrees to buy its distressed rival Wachovia for $15.1 billion in stock, ending a deal between Wachovia and Citigroup.
• Britain increases its government guarantee for bank deposits, following a similar move by Ireland.
• The leaders of France, Germany, Italy and Britain prepare to discuss the crisis at a mini-summit on Saturday despite disagreements that killed off talk of a Europe-wide bail-out package.
THE LOW-GRADE fear of bank and other corporate failures that spread slowly last year has turned to reality for many who have been victimized recently by the record closure of rural banks last year and worries that the preneed industry is on the brink of disaster.
The Bangko Sentral ng Pilipinas has said P21.6 billion worth of deposits are virtually frozen inside the 25 rural banks padlocked last year.
That’s a big amount of money at a time people are losing their jobs.
“There’s real fear among the people right now,” says Alvin Tabañag, a registered financial planner and author of “Kaya Mo Pinoy! 12 Steps To Build Wealth On Any Income.”
The timing couldn’t be tougher. If you’re fighting to keep your job or have already lost it, losing your savings is the equivalent of getting whacked in the head by someone you trust and being asked to pay for your hospital bill. These financial disasters rewrite for Filipinos what “safe” means.
Fortunately, all is not lost. When a bank is closed by the central bank, it is normally turned over to the Philippine Deposit Insurance Corp., which then examines the bank’s records to determine which deposits are insured. You can still get your money back—or at least some of it—if you know what to do.
Here’s a guide on how to get your life back after bank or preneed failures:
1. Bring proper identification. Both the PDIC and the Securities and Exchange Commission, the state regulator of preneed companies, say most delays are caused by lack of proper identification documents.
Some depositors bring ATM cards, credit cards, or membership cards in clubs to prove their identity. Cut the processing time by bringing any two of the following: Social Security System or Government Service Insurance System cards, Professional Regulation Commission license, driver’s license, senior citizen’s card, passport, company or school identification card, Taxpayer’s Identification Number card, a Philhealth card, and a voter’s identification card or affidavit.
If you are filing a claim on insured deposit in behalf of someone else, you need to bring the same documents, plus a special power of attorney (SPA). If the owner of the account is abroad, the Philippine consul where he lives must authenticate the SPA.
2. Bring evidence of your deposits or preneed policy. These include savings passbooks, certificates of time deposit, ATM cards, unused checks and bank statement, and other relevant documents. The PDIC will be double-checking the consistency of your signatures.
When claiming against preneed companies, bring a copy of the plan contract, the certificate of full payment, or official receipts of your payments so far, if the plan is not yet fully paid. In the case of plan holders of Legacy Consolidated Plans Inc., Scholarship Plan Phils. Inc., and All Asia Plans Corp., which have recently closed, you need to file a sworn complaint on or before March 31.
Sources who asked not to be identified say many of the documents issued by these firms did not have signatures and appear to be spurious. Take a look at your documents and show them to a lawyer who specializes in financial transactions, if you think their legitimacy will be questioned.
“Asking is actually free compared with the money you stand to lose,” says Atty. Carlo Cariño, senior partner at the Cariño and Mabalot Law Offices. You also need to provide the SEC with your complete and updated mailing address and contact numbers. Go to the Non-traditional Securities and Instruments Department of the SEC. In the Ortigas head office, their landline is 584-6058 and the department head is Jose Aquino.
3. Continue paying your loan when PDIC sends you a letter of collection. You are not off the hook even if the bank you borrowed from closes. You may be slapped fees and finance charges if you don’t maintain your good credit standing even in a closed bank.
4. Collect issued post-dated checks and assume automatic debt arrangements are out. These checks are no longer valid, so replace them or arrange to pay some other way.
5. Fill up three copies of a claim form from the PDIC and sign the “Signature of Depositor/Claimant over Printed Name” under the “To be accomplished by the Depositor/Claimant” portion in the claim form. Again, what the PDIC will be putting under the microscope is the integrity of the signature, making sure none are forged.
6. If you are filing in person, go to either the branch of the closed bank where you deposited your money or another site designated by the PDIC, or the PDIC claims counter located at PDIC Ayala Extension office, SSS Building, corner V.A. Rufino Street, (formerly Herrera Street), Makati City.
7. You can also process your claim via mail through this address:
The Assistant Vice President,
Claims Processing Deparment
Philippine Deposit Insurance Corp.
2228 Chino Roces Avenue
1231 Makati City, Philippines
Some depositors get their insured deposits within an hour if the documents are pristine and the account is “clean.” That means any loans payable to the bank and taxes that need to be paid have already been deducted, and interests earned were already added.
A “clean” account also means there are no questions about the legitimacy of the deposit. It is not unheard of for bank employees to be in collusion with depositors in “splitting” accounts when they realize the bank is about to be closed. This hurts bona fide depositors because the presence of split and fictitious accounts makes everyone jump through hoops to get their money.
Auramar Calbario, head of corporate communications at the PDIC, says claimants are normally classified into three: “clean,” “document-deficient” and “for further verification.” Only claimants with clean documentation will be paid within an hour or at least the same day.
If you belong to the second category, you may be asked to present more documents to prove you are the real owner of the account. If you belong to the third, claim agents will interview you and this is where the actual depositor needs to appear personally.
A depositor’s relationship with a bank can get complicated. Aside from the usual savings, checking, and time deposit accounts, now there are unit investment trust funds and investment accounts. There are joint accounts, accounts held in trust, institutional accounts and joint accounts. Which of these are safe? And what if your account exceeds the insured amount of P250,000?
Depositors sometimes commit the common mistake of opening accounts in different branches in the same bank, perhaps one as a time deposit, one as a checking account, and another as a savings account, and expecting that each would be insured up to P250,000. This is a grave mistake because the PDIC will add up all your single accounts in a particular bank and apply the P250,000 limit to the total.
But if one of your accounts is a single depositor account, and another is a joint account with your husband, for example, your deposit will be insured separately from the joint account. The PDIC website shows exactly how this is computed. Unit Investment Trust Funds and investment accounts are not insured by the PDIC.
If your deposits exceed P250,000, you may still claim for the excess but you have to wait until the PDIC has filed with the liquidation court, has already disposed of the bank’s assets, is ready to distribute these assets, and there is enough to go around starting with preferred creditors like the government to ordinary depositors—yes, that’s you.
In the case of the Rural Bank of Parañaque and other banks under the bankrupt Legacy group that were recently closed, the verification of documents and claim time is much longer. PDIC has started payouts for small depositors first (those who have P120,000 and below) last Dec. 22. Those who have more than that will have to wait until mid-February. Claim forms are not yet available, as of this writing. Go to the PDIC website, one of the most helpful government websites, on how to follow up your requests.
Tabañag says too many Filipino savers are still lured by easy money, which is why many are caught by bank failures and scams with their pants down. “Typical Pinoy. We want high returns quickly. We just want to sit back and wait. We find that it’s easy at first, but enjoy the rewards only for a short time,” he says.
The Legacy case is another big Ponzi scheme, he says. “Banks don’t have agents. The reason why Legacy’s agents were very confident especially in converting preneed plans into time deposits is they are expecting the PDIC to bail them out. Their practices were really not sound,” he adds.
Tabañag advised depositors and plan holders of Legacy to file a class suit against the company. Cariño says that “the more the voices, the more pressure” plan holders can exert on government and the owner. If the plan holders win their case, the owners may be personally liable to the people they defrauded.
Tabañag, a personal money management coach, also said that apart from waiting and praying, it is crucial now for depositors and plan holders to start rebuilding their educational and retirement plans and investing again—this time, in a smarter way.
“There is no other way but to start to save more again. You can do this by increasing your income, spending less or doing both. There are many ways Filipinos can do this,” Tabañag says.
“Forget the LV (Louis Vuitton) bags for the moment. You can go for UCB in the meantime. That means United Colors of Baclaran,” he says.
(For more personal finance articles, visit MoneySmarts at http://blogs.inquirer.net/moneysmarts.)
First, Martial Law closed down my newspaper, the original Manila Times, in 1972. Twelve years later, the Central Bank closed down my bank, Banco Filipino, in 1984.
Today, as the big bad wolf answering to the name of Global Crisis waits to gobble up the world’s economies, the successor of the Central Bank has assured us that we’re better off than many other countries. It sounds like Bangko Sentral ng Pilipinas is talking trust and confidence. It sounds like BSP stands on solid ground. Does it sound like BSP will bow to the Supreme Court and strengthen our faith in the justice system as well as in the ability of our banking system to withstand the shocks of the financial meltdown?
After 25 years of an arduous battle, the High Court has ruled that BSP is the same as CB and therefore must pay BF what it owes in damages for its “arbitrary” closure in 1984. From 92 branches then, it is down to 64, after it was reopened in 1994. From being the biggest savings bank for small people – 3 million of them — its depositors now number fewer than 300,000.
Here is a golden opportunity for Bangko Sentral to show that not only does it have money in these wobbly times – what a boost to the market as a confidence builder – but also to manifest its submission to the will of the highest court, the court of last resort. BF claims that BSP should pay P18.8 billion in damages plus 12 percent annual interest, the amount arrived at by a numbers cruncher affiliated with the Asian Institute of Management.
Does BSP have that kind of money? Gov. Amando Tetangco, whose smart, good-looking wife is the daughter of a justice, could do us all a world and a wealth of good by complying with the Supreme Court’s finding that after “a long delay” – 10 years between closing and reopening — it is time for the private bank to be given “full and complete relief.”
Author: Jullie Yap Daza