Live in the Philippines

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Be Careful Be Very, Very Careful

Money Matters / by

Last Monday LBC Bank failed, and billions of Pesos in depositor’s money is gone forever. Although the the Bank Regulators discovered something wrong with LBC Bank’s operations a year ago and gave it time to correct the situation; it still failed. The depositors found out Monday morning when the LBC bank didn’t open.

The personal side to this news is that it affects many members of my family, who were account holders with this bank. My Daughter Ymir in Singapore lost over P 200,000, my sister-in-law from Las Vegas is out P 800,000, My Daughter Hanna is out P 5,000 and my granddaughter had an account for P 3,000.

We have spent the week at meetings with the state-owned Philippine Deposit Insurance Corp PDIC and I have found out some interesting things. The P 500,000 insurance is the total amount you will receive no matter how much money you had in the bank and even if you had your money in multiple accounts, as proved by one American I was talking to, had Five Million Pesos in ten different accounts; he’ll receive in total P 500,000 and not a centavo more. He was one very angry dude!

At the Wednesday meeting I met over 25 foreigners who combined lost forty million pesos. We (Mayang and I) were there acting on our daughters behalf as Mayang has a Power of Attorney on Ymir Thea’s account. Her Sister in Las Vegas will either have to come here or try to settle their claim my mail as they didn’t allow anyone here to handle their accounts.

The people from PDIC told us that after all the paperwork’s were submitted, the wait to receive your money (up to P500, 000) will be seven months to a year and a half. My bet’s on the year and a half, if not longer.

Now I’ll tell you why I feel that if something sounds too good to be true, it is too good to be true, When the Peso to Dollar rate hit 55 to 1, about ten years ago, I was returning from sea and just happened to have $ 15,000.00 in my pocket, did I declare it? Of course, because I’m that kinda guy! I took all those nice Pesos to LBC bank and put them in time deposit accounts at 7% interest. Then I’d go down to the bank every three months and get my interest posted, and each time the bank manager would try to get me to move it all into a million Peso account and they would pay me 9%. My alarms started going off, as the most I could get in the States for a few $20,000.00 IRA’s was 5.4%.

I figured this LBC bank was headed for a fall, and over the next year I slowly closed each account and moved it back to the U.S. of A including the interest they paid. But I did have a good seven year run at some great interest rates. I told the people in Las Vegas what I was doing, but they were much smarter than me and went for that high interest. They showed me!

So my small piece of advice is to keep no more than P 500,000 in any one bank, insure those banks are international. And if you stop by a branch of your bank, and they tell you can only withdraw funds from the one you opened the account in, run, don’t walk to that bank and close the account that day.

Nothing struck me as very funny this week, and no bankers were hurt during the writing of this article, as they were all in hiding!

Be careful, be very, very careful.

Reader Interactions

Comments

  2. Paul…sorry to hear this story and sure many that lost money including members of your family sorry also.One has to be very carefull..now days..even here USA that insurance banks pays [FIDC]…well in one way does not mean much….because if 2 many banks go broke…then the way our goverment is going there would not be enough money to pay the depositers back…any way….good luck on getting your money back….sure you have material for yet another great post down the line…and as you said.”if to good to be true” run, not walk way from what ever it is that seems to good to be true…because in most cases its not true..and as cute as they all are your 2 girls and 1 granddaughter have a look of total discust on their faces….and so any way..hope it works out for you all there….

    • Dan;
      The sad part is this was known for over one year that the bank was in trouble, we’ll have to assume that members of the government and friends of the government were notified and got their money out in plenty of time. Thank heavens for that, too bad that info never trickled down to the little folk.

      • Well Paul…..the little folk always last to know…those in the goverment and the big have’s always take their slice 1st and the have nots or little person…they lucky if they get a crumb…and since 911 here in USA all the banks are infiltrated with many hidden new goverment regulations on how to keep track of you the person with a dime or 3 in the bank. And soon all those that like to get a SS check or other kind of goverment check in the mail [so at least they can touch it and look at it a little ]..those days are near over with..soon you will have to have all SS and other money direct deposit or grab your self one of those neat little goverment debit cards [another way to keep tabs on the common folk per say]…they say its to save money and help the all ready USA POSTAL SERVICE go broke faster…but to me it just another form of goverment control over the person…soon the greedy banks [they all are] will have that much more money they can leverage out here and there…as they say “times are changing”

        • Dan;
          I’ve been living out of the US since way before 9/11, if big brother wants to keep track of me it will cost them more than I receive from them in money that I earned and paid taxes on. I use direct deposit because it would be a hassel to receive checks here in the Philippines and then not be able to cash them here. As long as I don’t have to deal with Obama Care, I’m as happy as a clam.

          • Got if Paul..and lets all hope Obama Care does not happen…2012 will tell the story on that and maybe many other things also. Oh, Your story about the bank going under reminded me of the Saving and Loan bust many sunsets ago here in the USA…I did not lose any thing…because I did not have any thing to lose [was just a young person] but, I do remember how the saving and loans were the place to make big interest on your money and it sounded to good to be true and it was…and many lost a lot and never got any thing back…so as you said at beginning of your post or story here….One needs to be carefull…..very carefull all the time….

            • Dan;
              I believe Obama Care will go the route of the Dodo Bird, it was a poorly planned concept from the beginning.
              In the States I stayed with Credit Unions (NFCU) and stayed away from Savings & Loans and Banks, It was not because I’m smart, it was because every base I was at had an NFCU Office. It just made sence. It still does!

      • Sounds like “keel hauling” is in order for the bankers there mate! Good call keeping all you funds at NFCU, hell they even have a branch here in the oklahoma city area.

        • John:
          It must be all the Navy ships tied up there. No, just joking. NFCU is now open to all branches of the US Military, and is very popular with active duty and retired alike.

  3. Sorry to hear about your losses. Paul for the record, I like HSBC Premier. it requires $100K USD to open. They treat you like a king and you have your own private banker, your own tellers, etc…. With HSBC you can actually have 8 different HSBC accounts all over the world and have access to the finanical products that exist in those countries you have those accounts in. Also you can keep your account in I think up to 15 different currencies. So if you like the EURO keep your money in Euros. You don’t have to go to or be in those countries to open HSBC accounts in them. I opened one of my four existing HSBC accounts in Canada 3 years ago and I keep money in Canadian dollars their so I have also benefited in the appreciation of their currency. For example having an HSBC account in Canada gives you access to Canadian Bonds, Bills, CD’s, their stock market and all other financial products HSBC does in Canada. The same in the Philippines where you can buy Philippine Bonds, Bills, CD’s and their stock market. HSBC is all over the Philippines but mostly the bigger cities. Your depositor insurance is dictated by the Country but no biggie as you can transfer online money from say your HSBC Spain to the Philippines. Anyway it is something to look into. Other than that I also have an account in BDO for day to day things but no way no hoiw would I trust a Philippine bank as far as I could throw it. HSBC for me.

  4. Paul;
    For the record I lost not one centavo, I bailed out from that bank a couple of years ago. Your info on HSBC sounds good, and is the way for a lot of people to go. But I keep only 3 months worth of money here in country now, and the rest is with my Credit Union Stateside. (The largest on Earth) I do 95% of my banking online with them, so I’m well satisfied. But I agree with you as I know many Kano’s who use HSBC and are very pleased with the way they are treated.

  5. William Black wrote a book called” ” The Best way to Rob a Bank is to Own One”. Anyone interested in the twisited inner workings of our Government and the banking industry should read it…be warned it will make your blood boil !
    Its always insulting to hear this kind of news Paul, once again the elite walk out with millions and the hard working middle class gets left holding the tab !
    the American you mentioned who had millions in one bank that was known to have issues a year ago I have zero sympathy for….that was just plain stupid!!!

    • Yes…it surprized me he had millions in one bank..like kinda putting 2 many eggs in one basket a there.[and now they are scrambled]…maybe he was 2 greedy and had to learn a lesson….or 5..does being to greedy=being stupid?

    • Brian;
      The Kano’s were told by the bank that each account was protected by the PDIC which I found out a couple of years ago was false. But they told me also the same story. The rule is P 500,000 per bank not per account. The bank was known to be in trouble but only a very select few were privy to that information. So yeah I do feel a tad sorry for them.

  6. Incredible … –> 5 million pesos in 10 different accounts?? <– How can you be smart enough to collect 5 million pesos and NOT know the Philippines will only guarantee (yeah, right…) a total of P 500,000 for the entire sum??? Not saying that American was an idiot, but "greed" probably enters this scenario some where.

  7. Rich;
    It’s hard to not be tempted by those high interest rates, I know I was for a few years until my gut told me something smelled wrong. I guess not everybody’s nose is as good. But as I pointed out above, it was a great run for me until I bailed out. And you are right about the greed factor!

  8. Can somebody please shed light on this? Is it 500K pesos insured per institution per depositor? In other words, if I had 5 million pesos divided into 500K pesos amongst 10 banks, my 5 million pesos should be fully covered? I ask for your forbearance, as I’m really a newbie in these sorts of things.

      • But, what Isagani is asking is if he has 500K in Union Bank and 500k in BDO and they both fail, will he get back 1M or 500K. I am also unclear on that, although I believe he would get back 500k on each account, or a total of 1M.

        • Bob;
          You are so very correct, as long as the banks are not connected you’re fine, but if two of the banks you use fail at the same time? You might be having one really bad streak of luck.

  9. Thanks, Paul. I understand: So going back to my point, if I had 500K in each of 10 banks, my 5 million pesos should be fully insured?…

  10. Hey Paul,
    Is the bank seperate from the delivery service? I know I can go to the LBC here in the states where I send the balikbayan from, and open a BDO account. I wonder what the connection is?

  11. Hi Paul – I’ll be honest, I was surprised LBC has a bank All along I thought they’re just for sending packages. A year ago, LBC bank opened near where I live. The bank is between other big multinational banks. The moment I saw LBC, I was kind of wary and was thinking how long will it be operational. My hunch was right. Why do banks close?

    I remember from news this year another bank closed and PDIC explained to the people, it will be 7 months or so before they can claim their money back. Will every depositor really get their money back?

    • Sugar;
      You were wise to stay away from that bank.
      Banks close due to poor management or fraud
      According to PDIC depositors can get back all their money up to the amount of P 500K, above that amount they are SOL!
      We were told up to a year and a half wait, but we’ll see.

  12. hi paul,

    this is exactly the sort of thing that makes me feel sorry for people who didn’t take the time to educate themselves on handling money. at LBC too for getting into a business they know nothing about.

    as an ex-banker one thing i can say is, the moment you are offered savings interest rates that surpass the annual rate of inflation, forget it. banks that offer very high savings interest rates are actually red-flagging their own implosion ahead of time.

    you may also encounter other time deposit products offering 5-year lock-in deals at higher than savings rates which are safe, but check the bank history & annual reports for strength & stability before you commit.

    today there are more than a handful of PH banks that are run more stringently than banks abroad, and local business owners with more than 30 years experience running their own operations are good sources to ask where to safely deposit your hard-earned savings.

    the key is not to be greedy. anybody who wants to earn far better returns than his neighbor ought to be mindful enough to consider getting into business for himself. that way the return potential is as huge as the risk potential. fair enough, eh? ” )

    cheers,

    • Biz Doc;
      I find your comments to be good advice. But all the good advice in the world is useless if no one pays attention to it, but I hope they do.
      I view most money matters using my casino theory: When standing in front of a Casino, I just ask myself one question. “Did the man who built this Casino have a strong desire for me to become rich?” You could ask the same about high interest rates in front of a bank.

  13. This is a big story as i understand it the reason the bank went bust is because they were funneling to much money into the LBC Express side of the business . Which make you wonder , does that unit go under as well ? As far as getting back something of your losses good luck with that , Know one expat here in CDO that lost $2,000 two years ago , has made several trips to Manila and still hasn’t received any of the insured amount . But maybe foreigners are at the bottom of the list ?

  14. also, news reports indicate that LBC showed high DOSRI loans in recent years. DOSRI loans are accommodations and guarantees provided by a bank to its own Directors, Officers, Stockholders and their Related Interests (DOSRI).

    it’s like those running the bank are using YOUR money as THEIR play money.

    as a depositor, you will only see that information if you take the time to review your bank’s annual reports. if DOSRI loans make up a huge chunk of the loans being lent by the bank for any given year, you need to withdraw your savings and find a safer haven. sound banks in fact should NOT allow DOSRI loans too much– they should be negligible, or next to nothing.

    cheers,

  15. Hi Paul
    Thanks for another very informative article. I have read about this many times before so it is like after 500 K PHP in any one bank, you are on your own for losses and even the so called ” insured ” 500 K PHP almost sounds like a ” No Guarantee ” deal unless you want to play the Waiting Game.

    Sounds like a better arrangement for a Kano would be to keep the bulk of ones money in USA accounts and transfer to a Ph bank account on a somewhat as needed basis with some extra to cover unforseen expenses and to cover a time period for possible delay in transfer from USA account to Ph bank account.

    Glad you did not loose anything yourself but sorry to read about your family members losses. I hope eventually they will get something back but if one of them has to come there from the USA to file a claim that would eat a chunk out of the total insured amount.

    The way things seem to be going with banks and other financial institutions in recent years who knows, maybe hiding ones money in a box burried in the back yard or under the mattress will be safer than these banks LOL. It’s a shame you can hardly trust anything any more.

    • Bob;
      Burying the coffee can in the back yard, I tried that and the dogs kept digging it up. I’m under your plan and have been for a few years. I bring in enough money for 3 months living expenses. If I need more I’ll ATM it, but I try not to do that. At the malls I use my Visa and pay off 90% of what I charged the next day. I’m like the guy that wears a belt and suspenders, he has trust issues.

  16. Paul,

    Sorry to hear about your families losses with LBC. I’m with Bank of America, but getting ready to switch banks. They just layed off 30000 people. Apparently the old CEO bought out troubled Merrill Lynch and Countrywide Mortgage and they are really indebt. So the new CEO is trying to create more revenue. Warren Buffet still believes in BOA, he invested $5 Billion with them. I don’t have as much faith. HSBC sounds like a good choice for a bank there. I think the closest branch may be in San Fernando, Pampanga. Hopefully they will get reimbursed in a timely fashion. But really, the first signs of trouble i would have been gone in a heartbeat. Take care.

    • Papa Duck;
      The problem was the bank and government regulators made sure there was no hint of trouble. Only their already rich friends had the chance to bail out on time. But no shock there! I have a lot of friends who like HSBC, it might be a good way to go.

  17. Paul i feel sory for you and your family this is a horrible thing to happen to anyone ,as we saw in the us some people just walked away with not a scratch while others were absolutly devastated ,same here in australia so what about the ceo’s i bet that they are okay they should be hung drawn and quartered ,i dont know about the phills but here one of our prime ministers had the brilliant idea to de regulate the banks and ever since then the little person has paid more fees, and more fees and more fees while the banks make outragous profits every quater it is a record profitof all the major banks ,just wonder what would happen to there record profits if everyone withdrew there money ,i truly hope that the president and government hold someone accountable for this and not sweep it under the carpet there must be thousands of people who have lost money some only a little but to them it was a lot damb these high roller bankers
    chris

  18. Chris;
    I’m fine and I’ll make sure my daughters come out of this okay, because that’s what we do as a Daddy. If they get paid by PDIC all the better. As with most things here, no one will be held accountable, corporate bonuses will be paid, and the little guy gets the fid (shaft).

  19. Knowing how dishonest and corrupt Philippine business practices are it is astonishing that an expat would keep a large sum of money in a Philippine bank – over the years how many have gone bust? The 500,000P compensation will be paid years in the future,if ever. Live in the Philippines but dont have a financial interest there. Years ago some foreign banks formed partnerships with Philippine banks – most lasted just a short time due to what was described as incompatible business ethics – ie too easy access to the banks money by the board and management.

    • Bryan;
      I must admit that I did it for years. And I never had a problem which I will chalk up to luck pure and simple. But to each his own, but I’ll not do it again for any reason.

  20. Hi Paul,

    I feel bad for all you guys who lost money with LBC Bank. The deposit insurance is probably similar to the Canadian insurance (limited to per person, not per deposit account). However, our retirement investment with a CDIC bank has separate eligibility.

    Interestingly enough, LBC is an Araneta corporation. What can one expect from a family like this, belonging to the oligarchy? An Araneta is married to a Marcos daughter. I hope the BSP take everything they’ve got (apparently 6 homes in Forbes Park), and take them to the cleaners. One can always dream.

    I bank with HSBC, but I got to the point that we really don’t have any control of our money once we put in the bank.

    Alex

    Alex

    • Alex;
      I felt bad for all those people who lost their savings, even the greedy ones. I met so many while we were doing the paperwork for our daughter. Not one person will ever be punished for these crimes and I strongly feel it is a criminal act perpetrated by both the bank, and the government that took no action. The other people who suffered were the employees of LBC who lost their jobs through no fault of their own. As they were kept in the blind also.

  21. Are there any large, established banks that failed and been taken over by PDIC? The only ones that I’ve heard about are smaller and/or rural. A couple seemed to have the “too good to be true” interest rates.

    Just wondering, as pilipino businesses have to keep their money somewhere.

  22. Hello Paul, going back to that american who had 10 accounts with LBC, was it 10 separate accounts of 500k but all in his name? or was it named for 10 different persons (dummies)? because i also have multiple accounts with LBC but under different family members names just to fall within PDIC coverage. Thanks!

  23. Senior,
    It’s par for the course now a days hardworking people getting ripped off of their savings by goverments and banks. Ifeel bad for all who lost their money exspaecially the elderly who probably lost their enire life savings. Do you think justice will be served? NO!!! The theives cover each others back. Then the fact that people have to wait about a year and a half just to get some of their money. Hell some can’t last that long.
    This just proves my thinking is correct keep majority of my money in NFCU and hold no more than 100,000P in a Philippine bank for house hold use and emergencies. This is a sad article but it proves curruption is world wide.

  24. Bruce;
    There is nothing you wrote that I would disagree with, sad to say, it’s all true. A wise move to just transfer in what is needed with a small account here for extras.
    You’ll do well with that plan.

  26. Hi Paul,

    I would say that Banco de Oro and Metrobank have solid reputation and in good financial standing. Putting some of your nest egg in Phil peso in their various investment vehicles is a prudent move to get better interest rates compared to the almost zero interest you get here in the US. Besides, it will also be a good hedge against the depreciating dollar.

    Any local banks you guys think are reputable and solid besides these two?

    • Gerard;
      There are many trust worthy banks here in the Philippines, and with those banks you’ll find interest rates similar to US Banks.
      It’s as simple as this here; Bad bank= highest interest Good bank= normal interest, keep your money safe here or anywhere.

      • Paul,

        Can you name a US bank/financial institution now that can give you interest rate for short term rate of 3.5% APY here in the US? Metrobank Special Deposit Account (in Phil peso) offers this rate and can be liquidated every month. All the banks here in the US are offering less than 1%…some will offer 3.5% but tying your money for more than 5 yrs.

        • Gerard;
          As a matter of fact I can’t, but we were talking about high interest in small banks on time deposits. So if Metrobank is paying 3.5 on the short term that is very good.
          I use Navy Federal Credit Union in the states and they pay me 5.12% on my IRA’s albeit in each of my accounts, I’m required to deposit $20,000.00 (Thank you LBC Bank for one of them) Yes, it’s long term, but I have no need for the money at this time. I owe nothing to anybody, my house and car belong to us, plus I have not had a loan in the last 30 years. (I do keep a Visa card for any emergency)

          • Good for you Paul…no debts you owe and house and car been paid of. that is my goal when I retire in less than 10 yrs.
            thanks for the info and interesting article…it makes me reevaluate banks in the Phil.

            • Gerard;
              I’ll admit it was my job that helped me, as a Merchant Seaman sailing six months on and two months off I really had no need to own anything, but paid $60.00 a month for a storage unit in Florida, and banked my pay plus my retirement check. As my Dad used to call me jokingly “The richest homeless person he ever knew.” When off on vacation, I’d pick a spot on Earth I wanted to visit and go spend a couple of months there until I wanted to sail again. It was a good life! But now here in the Philippines, it’s better!

  27. There are ways to screen out the failing banks using financial metrics. One of the simplest and most effective was the Texas Ratio, which was used to predict bank failures in the US S&L crisis in the 1980s and 1990s. I think it was even cited by William Black, the author of “The Best Way to Rob a Bank is to own one.”

    The ratio was developed by Gerald Cassidy and other analysts at RBC Capital Markets as an early warning system to identify potential problem banks. The higher the Texas ratio, the more severe the bank’s credit troubles.

    Eight Philippine banks have a Texas Ratio greater than 1:1, indicating the possibility of insolvency.

    For more information, visit my blog at:

    http://bancofilipinofailure.blogspot.com/2011/09/texas-ratio-of-select-philippine-banks.html

  29. Mmm, looks like my comment earlier in the week has been eaten by the teething trouble gremlins or kidnapped by aliens, oh well never mind.

    Paul;
    Sorry to hear about your families dilemma.
    Best to spread the money around like manure, but in different gardens,lol.

    • David;
      As long as the rich and powerful lose no money it will remain that way, the same goes in the United States.