Feb. 17--The central bank is unlikely to approve the proposed loan of the Philippine Deposit Insurance Corp. (PDIC) that would fund the insured deposit claims of the closed rural banks of the Legacy group of companies.

The Monetary Board, the policy making of the Bangko Sentral ng Pilipinas (BSP), has been reviewing PDIC's proposed P14-billion loan for the past two weeks.

"Why would we fund these rural banks that we already closed and PDIC has Deposit Insurance Fund [DIF]," a Monetary Board source said.

The Deposit Insurance Fund is the source of funds to payout deposit insurance claims. PDIC's fund grew by 11.4 percent to P60.48 billion in 2008 from P54.3 billion in 2007. The fund has likewise grown at an average rate of 9.4 percent over the last five years.

"They should take the hint," the Monetary Board official said, when asked why the central bank has not yet approved PDIC's proposed loan.

The Legacy banks have become controversial, because Celso de los Angeles, one of the major shareholders and the incumbent mayor of Santo Domingo, Albay. He owns Legacy Consolidated Inc., a pre-need company that recently filed for dissolution and is under scrutiny by senators and members of the House of Representatives.

De los Angeles also faces syndicated-estafa cases file before the Department of Justice against owners of the Legacy group. (See related front-page story.)

Delay unusual

The two weeks that have lapsed are considered unusually long, given that in the past, the central bank normally decides on a loan before deposit claims are paid out.

The PDIC has already started servicing the deposit claims of the closed 12 rural banks of the Legacy group on Friday. The total insured deposit claims of the rural banks amount to P14 billion.

Jose Nograles, PDIC president, earlier said they are processing first the claims of small depositors with regular savings accounts of P100,000 and below in the 12 rural banks of the Legacy group.

The Monetary Board has placed 13 rural banks under PDIC receivership since December last year because of severe liquidity problems and alleged unsafe and unsound banking practices. Those banks are the Rural Bank of Paranaque, Pilipino Rural Bank, Rural Bank of Bais (Negros Oriental), Rural Bank of San Jose (Batangas), Bank of East Asia, First Interstate Bank, Philippine Countryside Rural Bank, Dynamic Rural Bank, Nation Bank, Rural Bank of Carmen (Cebu), Rural Bank of DARBCI, Bicol Development Bank and San Pablo City Development Bank.

The central bank started servicing the deposit claims in Rural Bank of Paranaque last month.

The rural bank depositors with accounts worth P100,000 and less represent around 62 percent of the total deposit accounts of more than 130,000 depositors.

Meanwhile, the PDIC is pushing to increase the maximum deposit insurance coverage to P500,000 from the current P250,000. But doing so requires congressional approval, and lawmakers have yet to take up that matter.

Of the total proposed increase in insurance coverage, Nograles said in earlier reports that the PDIC would shoulder P250,000 and the remaining half would come from the national government.

At the same time, the PDIC proposed the permanent adjustment of the deposit insurance coverage and tax exemption for the assessment of banks' income tax.

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