Ducky Paredes

“What is ‘high interest’? The MB sees an effective interest rate on deposits or borrowings that is 50 percent higher than the prevailing market median for similar banks.”

by Ducky Paredes

The Monetary Board has issued Circular 640, which amends Circular 341 issued in 2002. These are the implementing guidelines of Section 56 — “Conducting Business in an Unsafe or Unsound Manner” — of Republic Act 8791 or the General Banking Law of 2000.
The 2002 circular already lists “excessive reliance on large, high-interest or volatile deposits/borrowings” as an unsound practice. Circular 640 clarifies this further to be “excessive reliance on large, high-cost or volatile deposits/borrowings to fund aggressive growth that may be unsustainable.”
What is “high interest”? The MB sees an effective interest rate on deposits or borrowings that is 50 percent higher than the prevailing market median for similar banks.
The refinement is a good thing but not really what is needed. Clearly, where the failure is has to be in the enforcement. Recently, the Bangko Sentral ng Pilipinas (BSP) padlocked 13 rural banks belonging to or affiliated with the Legacy group on account of unsafe and unsound banking practices, insufficient assets to cover liabilities, and poor liquidity. The Legacy banks had been known to lure depositors with a 20 percent interest.
Rural Bankers Association of the Philippines (RBAP) President Tomas S. Gomez IV says of this amendment: “It further strengthens depositor protection and is consistent with the BSP’s mandate of prudential regulation. Coupled with PDIC charter amendments, the revised circular will further strengthen the Philippine banking system.”
Legacy was basically a pre-need firm, whose principal owner had been banned in the martial law years from having anything to do with rural banks after several RBs under his wing had to be forcibly shut down when the bank coffers had been totally emptied. Why was he allowed into the rural banking system again? Why let the fox into the chicken coop again?
Over the last two years, the Legacy banks had been the topic of conversation among rural bankers; yet, Celso de los Angeles was allowed to gain control of several RBs despite his history with RBs. Rural bankers wondered why the MB or the BSP was not moving on the Legacy banks to the point that rumors that Celso was a favored friend of a high government official seemed true.
Enforcement – not new regulations – is the main problem not only in the rural banking system but elsewhere. In fact, regulations seem to work to tie the hands of enforcers rather than strengthening them.
In fact, all too often, regulations are used by the crooks as their excuse for not moving against favored clients or the perceived friends of the powerful.
Strict enforcement – not more or re-stated regulations – is what we need not only in the rural banking system but in everything.
As it is, so many Pinoys are being gypped by firms like the Legacy Group who are actually in violation of the rules under which they are allowed to exist but which are not being strictly enforced. Plus, to top it all, these scammers can always find some regional trial court (RTC) judge who is willing (for a fee) to issue a temporary restraining order (RTO) to the BSP and the MB to prevent it from doing its job of enforcing the regulations that the RTC judge’s client has been blatantly violating.
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Unlike Senator Francis “Kiko” Pangilinan, I am not overly afraid that what he calls the “militarization” of Gloria’s government will lead to a take over by the generals and colonels that she has put in place in many parts of the bureaucracy will mean that she can stay in power beyond June 30, 2010.
The appointment of retired Adm. Tirso Danga to the National Printing Office (NPO), retired Maj. Gen. Jovito Palparan to the Dangerous Drugs Board (DDB), and former Armed Forces chief Gen. Hermogenes Esperon Jr. to the Presidential Management Staff, according to Kiko, are “all part of the arrangement. This is an issue of survival. She wants to stay in power, to keep her ship afloat.”
Frankly, I don’t see it. In fact, I am in touch with some of these retired military who are in prime posts in her government. Generally, they are counting the days and even (in one case, minutes) before her government ends and they can begin enjoying their lives and their golf game in earnest.
Besides there are military men such as Brig. Gen. Salvador Mison who will, as one of the leading alumni of the Philippine Military Academy, issue statements reminding his fellows of the code that was drilled into them as cadets.
Recently, a statement that backed the military officers in the Philippine Drug Enforcement Agency (PDEA) was issued by Mison, as president of the 1955 PMA graduating class.
The retired military are folk just like you and me. They are not more blood-thirsty or more prone to violence or committed to holding on to power for themselves. Sure, there are crooks who have stars in their epaulets just as there are crooks wherever one looks.
Still, the training that the PMA gave our military officers does not easily go away with their acquisition of power and money. It is, in many of our retired military, an integral part of their souls and what makes them the men that they are.
Certainly, a retired admiral could reform the National Printing Office (NPO) which has, even with the constant change in directors, always turned out to be run by crooks and cheats. Someone made famous by stories about torture and summary killings in the Dangerous Drugs Board could help drive away the drug syndicates. Even when all else has failed, a bloody war against the drug syndicates may just be the way to go.
In all of these changes in government, the ascension of a general to the Presidential Management Staff (PMS) has resulted in having a media person appointed Press Secretary. Having someone in the OPS who knows his media and can speak our language — Secretary Cerge Remonde — is a welcome change.
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hvp 01.26.09)