Monday, September 12, 2011

LBC Bank: Another One Bites the Dust


Dear Investor Juan,

I'm afraid I'm here to ask about another bad news :(

This morning (Sep 10), we noticed that the LBC Development bank branch here in the province already has huge "X" marks on its doors. There were two guards manning the bank, one from PDIC, one from LBC. Upon asking the PDIC guard, he disclosed that LBC hasn't been paying its loans to BSP. And upon searching the web, I came across this article.

Does this mean that LBC Development Bank has really gone under? :( No withdrawals will be allowed going forward? I'm wary of the situation because my family has an account exceeding the 500k insurance limit. We know some of the LBC branch employees and they seem to have no idea why PDIC is suddenly taking over.


Dear Anonymous,

Unfortunately, it does seem that this development has taken everyone by surprise. Mainstream media was only able to confirm the news yesterday (here are articles from ABS-CBN and the Inquirer), a full day after you and Bombo Radyo broke the story out.

That another rural bank was closed by PDIC is not really surprising, given the more stringent capital requirements that have been imposed by regulators since the Legacy fiasco. What would make people worry is that the bank in question bears the name "LBC," a very well known and, arguably, highly reputable brand, mostly due to the prominent "Hari ng Padala" commercials of its LBC Express affiliate. A bit of due diligence would, however, have revealed that LBC's name was not as immaculate as it may have seemed, with the group being embroiled in a couple of financial scandals over the past five years (e.g., see this article from a year ago).

Regarding your deposit, the insurance coverage is 500,000 pesos per depositor per bank. If your holdings are spread among several family members, and each person holds less than the covered amount, then your family should be able to get its money back in full. If anyone holds more than 500,000, however, even in multiple accounts in the same bank, I'm afraid that your chances of recovering your deposit in full is slim: your only chance is if LBC Bank has enough assets to cover its obligations, and we should remember that the reason why the bank was closed in the first place was because it did not have enough capital.

So there. Best thing to do now would be to file your claim early, wait, and hope for the best.

LBC Bank's website is down as of this writing.

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