BINMALEY, Pangasinan—At 86 years old, Lourdes Angeles rises up early every day to go to church, do some shopping and every so often drop by the local bank branch to check on her deposits. 

But that was before April 18, 2008, when the People’s Rural Bank of Binmaley Inc. was placed under receivership on orders of the Monetary Board of the Bangko Sentral ng Pilipinas (BSP), leaving more or less P173,000 deposit accounts in excess of the P250,000 insured deposit mandate naked and exposed.

These days she sits all day long at a wooden sofa waiting for the promised notice from the Philippine Deposit Insurance Corp. (PDIC), whose personnel had promised she would be summoned one day and have the balance of P450,000 uninsured deposit paid back.

To this day not a single centavo had been returned, and each day that passes the likelihood that any of that money would be returned grows slimmer.

“I wish I could get back my money as soon as possible. I still believe I can get it,” this wife of a retired employee of the Philippine National Bank’s San Fernando, La Union branch said in perfect English.

She and her husband Romulo, a daughter and two grandchildren kept a total P1.2 million at People’s Bank, as locals call the failed local lender, the money representing retirement fund and accumulated savings the past many years.

Lourdes now lives with a granddaughter in a white bungalow that the Angeles couple built from the ground up through hard work, entrepreneurship and perseverance.

But she is now P450,000 poorer than she was 14 months ago, the struggle to get back the balance of her deposit proving more and more difficult with each passing day.

“But I still pray, drop by the bank sometimes and do some Magic shopping,” she said, referring to a local retailer chain where she and the rest of the family get their daily provisions.

She admits shopping for the week’s provisions is about the only kind of joy she looks forward to in recent months.

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ANGELES(top left): “I wish I could get back my money as soon as possible. I still believe I can get it.” ABOVE the People’s Rural Bank of Binmaley in Pangasinan.

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A few blocks away, Cesar Singson and wife Jane struggle to keep their emotions in check whenever the subject of deposits is raised.

The couple had P141,000 stashed away at People’s Bank when, without warning, the PDIC swooped down and took possession of everything at the bank’s main offices in Binmaley town.

Honeybal Pinzon, the bank’s auditor and compliance officer, said the PDIC even took the nonfiction hardbound, book marker and all, he was reading at that time.

“They also took away a couple of sacks of milled rice belonging to one of our personnel. They never returned it,” he said.

Jane Singson was scandalized that the PDIC would walk in like they did and cart away everything they could lay their hands on at the bank.

Nothing she and her husband said would convince the PDIC to return the more than P250,000 insured deposit mandated by law.

But unlike most depositors, Jane’s husband is a nephew of former BSP governor Gabriel Singson, whose own house was just a couple of blocks away from the young Singson couple’s.

Both claimed not to have bothered to tell the elder Singson of their troubles at People’s Bank, knowing that he had enough professional problems of his own.

But the Singson name seemed not lost on People’s Bank owner Fidel Lo Cu, who by telephone agreed to pay back the couple’s P141,000 uninsured deposits with an initial payment of P41,000, followed soon after by P50,000 and then by another P15,000.

Strong-willed Jane said she hired a lawyer and hounded Cu with a demand letter so often the poor man soon parted with another P6,000.

“He still owes me P30,000,” she said emphatically.

But Jane’s parents-in-law were not as lucky, the elderly couple Tirso and Demetria having recently died without seeing a single centavo of their P50,000 uninsured balance that was still with the bank when it closed.

“She was heartbroken, despondent,” Jane said.

Binmaley Water District, which maintained an account worth P2.5 million at the time of closure, has its own horror story to tell.

According to Mariano Gonzalo, a civil engineer and manager of Binmaley Water District, the town’s water supply was devastated by Typhoon Cosme exactly a month after People’s Bank was shuttered.

The whole town was without power and had no potable water supply for two months after the last roof had been blown away by 105 kilometer-per-hour winds.

Gonzalo said the Office of the Government Corporate Counsel (OGCC) had to write the PDIC a demand letter before P250,000 of the water district’s money was released, leaving P2.3 million still unpaid.

They needed to quickly purchase generators to help pump water at key areas around town, but the water district’s money was tied up at the now-shuttered People’s Bank, he said.

Industrious folk, victims

The Binmaley people are an industrious lot, with every other house boasting of bagoong factories that help make the town one of the most prosperous anywhere in the country and making banking services there a true necessity.

“It was worse than the Typhoon Cosme aftermath. We only had partial restoration of water services because the PDIC denied the OGCC petition to have the entire amount released,” Gonzalo said.

Ninety-five percent of Binmaley, a town which has as much bangus fish ponds as it has bagoong factories, went without water for some months thereafter.

Perhaps one of the most heartbreaking of all the sordid stories to emerge from People’s Bank’s demise was the money saved and lost by 50-ish Chona Cansino, who maintained three separate secret bank accounts for each of her three grown children.

She had an account worth P500,000, another for P400,000 and still another for P386,000. Each was started as a P50 deposit made out every payday while working as a casual employee of the Central Pangasinan Electric Cooperative Inc. for most of her life.

Each one was intended as a special-event surprise gift for when her children were ready to marry or leave home to live separate lives of their own.

“I never told my children because these were meant as wedding or graduation gifts later on,” she said.

The PDIC gave her back only the mandatory P250,000 or for a total P750,000 and held the balance of P536,000 for when liquidation shall have been completed and all the bank’s assets sold.

Cansino said the uninsured deposits were on top of losses she sustained from that other financial debacle known as the CAP Educational Plan, where she lost tens of thousands of pesos in broken college-education matriculation promises.

In both cases, she entrusted money often representing 13th-month and other bonus earnings, dividend payments or loan proceeds and thousands of simple everyday decisions to forgo on something just so the kids have money to fall back on as the more critical need arises.

“I don’t really think of the money as lost. I deal with it by pretending at the back of my mind that it’s just there waiting for the reopening of the bank. Otherwise, it would just be too painful to think,” she said.

Cansino has banked with People’s Bank ever since the lender first opened in 1964 under the leadership of its founder Julio Javier. Javier is the grandfather of Armi Bangsal-Lorica, entrepreneur and president of the People’s Bank of Binmaley Uninsured Depositors Association or PBBUDA, who is leading efforts to resurrect and recapitalize the bank by converting the uninsured depositors’ money into equity.

Cansino’s eldest son, Christopher, also Lorica’s godson, now works for Malacañang at its Presidential Action Center, and it was he who received his godmother’s letter to President Arroyo asking for presidential intervention in the matter of persuading both the BSP and the PDIC to take a good look at their deposit-to-equity proposal. That letter had been “forwarded through proper channels” and that, Lorica said, was the farthest she knew of its fate.

Godson and godmother seldom crossed paths when the young man was growing up and studying, but events after People’s Bank’s closure last year brought them closer than they had been in years.

“It is strange how our individual lives converge again at the failure of one bank and how we all have been brought closer by it,” Lorica said over grilled bangus and hito for dinner that Cansino hastily served at her pond-side restaurant on the edge of town.

Lorica has a long list of people (allegedly including money of some of the highest local government officials) whose financial futures have been drastically scaled back by the irresponsible banking practices of some.

Cansino finances the law studies of her youngest daughter with earnings from her fish ponds and from a restaurant business funded by a loan from another bank.

Then there are up to 80 private-school teachers from the Binmaley Catholic High School cooperative whose payday-to-payday contributions to a common pool have grown over 14 years into a fund that its individual members discuss only with fear in their confused and bewildered minds.

The exact amount still tied up with the closure of People’s Bank is a matter of conjecture, but a senior pool member said the amount “approaches P300,000, maybe more.”

Pooled funds

Members loathe discussing the matter for fear they will be asked to explain why the fund had not been formally converted into a full-fledged cooperative or properly registered with the Securities and Exchange Commission.

This pooled fund was on top of one teacher’s personal savings of some P530,000—also representing Social Security System loan proceeds, dividend payments and years of simple frugal living with a young son.

She and her husband, who practices a different profession, took out loans here and there, saved money any way they can and deposited them under People’s Bank’s double-your-money-in-five-years scheme.

They never had reason to believe that one day the bank would tank under the weight of its allegedly mismanaged finances, as the bank has always been there for them the past 44 years.

She said the cooperative fund, which started as a paluwagan, obtained its seed money of P80,000 from a financially savvy diocesan priest, Fr. Joel Ynzon, whose only mandate was to deny the fund’s managers the privilege to dip into the pool established exclusively for teachers.

Such was the program’s repayment rate that from an initial loan of up to only P2,000 per borrower, one can borrow up to P40,000 at a rate of only 2 percent per annum.

Many a teacher’s child obtained college degrees on this basis, and not once had the kindly parish priest intervened on behalf of any borrower through the years, the teacher said.

“Like most of my fellow teachers, I pretend the money is just there somewhere. We are all positive we will get back our money eventually,” she said.

Lorica said the PBBUDA will force the deposit conversion issue by demanding that the PDIC provide them the financial statements upon which to build a rehabilitated and recapitalized People’s Bank.

Although the process of liquidating the remaining assets of the bank to pay off creditors has already started, Lorica never doubts the rural lender can still be saved by its uninsured depositors who agreed to convert their exposure into equity.

White knight in limbo; BSP’s advice

She said the PBBUDA has partnered with an investor allegedly willing to help the group put up the P270.76 million needed to cover People’s Bank’s capital deficiency, provided its financial statements were made readily available.

Unfortunately, however, Lorica said the PDIC insisted the PBBUDA “show us the money first” before the allies have access to the bank’s financial records, which to her is an absurd precondition.

“How can a legitimate white knight blindly enter into a binding agreement without exercising due-diligence audit first?” she asked in frustration.

Deputy BSP Governor Nestor Espenilla Jr. said the uninsured depositors of closed banks are free to put up a rehabilitation program and need only approach the PDIC for its assent.

“Typically in a rehab plan, the depositors are just one piece. So, even if they convert their deposits into equity, that is not necessarily enough to constitute a full rehabilitation of the bank,” he said of no bank in particular.

Even when the uninsured depositors find an ally in a new investor, they both need to come to terms in the context of a rehab plan that may require one to accept a longer repayment period for his exposure and the other to agree to be locked in for an extended period, according to Espenilla.

“I am saying if only the depositors alone say they’re willing to convert may not be enough, because there are many other creditors as well, including the BSP,” he said.

“If the mainliners are just the depositors and they all agree to convert to equity, then that’s part of the action. But a bank is not just capital. Who runs it after, for example? The financial is just one side, but who runs gets to run it after all?” Espenilla asked further.

Previous sets of officers are not necessarily barred from running a rehabilitated bank unless they have been disqualified beforehand, he added.

Both the BSP and the PDIC evaluate rehabilitation proposals on a case-by-case basis, careful to calibrate its net results and whether such proposal is sufficient, Espenilla said.

As for the role of personalities involved in the demise of any bank, Espenilla said regulators will not stand idly by just watching what will happen.

“Of course not. We have pending cases against them but the wheels of Philippine justice grind ever so slowly,” he said.

The uninsured depositors are particularly sore at Cu, whom they accuse of mismanaging the bank.

BSP officials would not comment on the progress of their investigation on Cu’s alleged financial shenanigans while at People’s Bank.

Former Golden Seven or G7 Bank owner Cu took over management of People’s Bank in December 2003 with the infusion of P37.5 million in fresh capital.

Cu has since changed his equity deposit in the bank into an ordinary deposit liability, much to the consternation of the BSP, which declared the conversion irregular.

The BSP has found a serious impairment in the bank’s solvency, liquidity and profitability ratios even before Cu took over.

But Cu would later allegedly make matters worse by engaging in highly questionable transactions like the irregular booking of income from asset sales, frequent and questionable huge cash advances, and failure to report unsecured loans granted to its own set of directors, officers, shareholders and related interests or DOSRI, among other findings.

Whatever it is, the fact remains that while all this legal wrangling is going on among parties, dozens of ordinary people are sadly waiting, ruing the day they trusted in others to care for their hard-earned money. The story of Binmaley provides a cautionary tale for all—and, hopefully, a template for regulators, reformers and policymakers tasked to make things right.