Philippines Banking Systems Ranked as High Risk

Philippines banking systems are ranked as having high risk factors according to a recent study by Standard & Poor (S&P.)   The archipelago was classified among Group 7 nations, with Group 1 as those with the lowest risk levels while Group 10 has the highest risk levels.

Bank teller in the Philippines

 (Photo Source: blog.vittana.org)

S&P Ratings Services’ released its Banking Industry Country Risk Assessment (BICRA), which assessed 86 banking systems worldwide according to a report in the philSTAR.com

The Philippine banking system’s credit risk to its economy was ranked “very high” by the rating agency. Among the countries with “low risks” are Switzerland and Germany, while nations with “extremely high risk” include Belarus, Jamaica, Greece, Egypt, Cambodia and Vietnam.

The Philippines is classified with Latvia, Uruguay, Bulgaria, Iceland, Jordan, Morocco, Portugal, Indonesia, Ireland, Russia and El Salvador in Group 7. These countries banking systems have strong or high-risk impact on their respective economies.

BICRA is scored on a scale of 1 to 10, ranging from what S&P’s view as the lowest-risk banking systems (Group 1) to the highest-risk (Group 10). The BICRA methodology has two main analytical components: economic risk and industry risk.

A BICRA analysis for a country covers all of its financial institutions that take deposits, extend credit, or engage in both activities.

In addition, the analysis considers the relationship of the banking industry to the financial system, and furthermore to its sovereign. For that reason, many of the factors underlying a sovereign rating are important in determining a BICRA score.

“Our analysis of economic risk of a banking sector takes into account the structure and stability of the country’s economy, including the central government’s macroeconomic policy flexibility; actual or potential economic imbalances; and the credit risk of economic participants – mainly households and enterprises,” the report said. 

A total of 84,873 depositors lost some P3 billion in savings as a result of the collapse of nine banks from January 1 to June 15 this year according to a report on  INTERAKSYON.COM.LBC Bank

(Photo Source: wikimapia.org )

More than 320,000 depositors lost a total of P6 billion when LBC Bank was shut on 9 September 2011.

The nine lenders shut from January 1 to June 15 this year were Capitol City Rural Bank (Cavite) Inc., Rural Bank of Gainza (Camarines Sur) Inc., Rural Bank of Majayjay (Laguna) Inc., Rural Bank of Buenavista (Agusan del Norte) Inc., La Consolacion Rural Bank (Laguna) Inc., Rural Bank of Kinogitan (Misamis Oriental) Inc., Cooperative Rural Bank of Bulacan, Rural Bank of Naval (Leyte) Inc., and Rural Bank of Borongan (Eastern Samar) Inc.

In 2012, more than 120,000 depositors lost some P19.5 billion as a result of the collapse of 24 banks.  

Planning on banking in the Philippines? Be very sure you thoroughly investigate and research the bank you plan to deal with.  The bulk of our banking needs will remain in the United States.

While we do have a peso savings account with BDO and are very pleased with their customer service, we feel, from an economic and security standpoint, we should continue to keep the bulk of our assets in the States where our deposits are insured up to $250,000 per depositor if they're held in accounts that meet the FDIC-insurance rules at an FDIC-insured bank.

PDIC

(Photo Source: www.pdic.gov.ph )

The maximum deposit insurance coverage provided by the Philippine Deposit Insurance Corp. (PDIC) to depositors is P500,000.

 

26 comments

  1. Re: FDIC — don’t bet on it.

    Take some time to read about Cyprus and their disaster early this year, and ongoing. Google “bail-in”. If your money is in an acct which is labeled as insured, and your bank website says it is all there, but you are not allowed to withdraw more that $200/day, is it really all there?

  2. Dave,
    That’s good info to know. I’m wondering how the US System ranks. I think using Citibank and HSBC in the Philippines would be ok.

    1. The US is ranked in the tier 3 group PapaDuck, along with Hong Kong, France, Saudi Arabia, Singapore, Bermuda, Denmark, the Netherlands, New Zealand and Taiwan.

  3. BPI has a direct tie with Wells Fargo in the USA. So, I cash US checks into my BPI US Dollar account (usually takes about a week to clear). Then when the exchange rate looks better, transfer money to my BPI Pesos account. If I want to transfer money faster, I use Xoom.com and it is the cheapest wire transfer you will find.

    BPI accounting can be done mostly online. You can even pay some of your bills online. Also found BPI to have better customer service than most other banks and they have branches nearly everywhere in the Philippines.

    For those who have an SM rewards card, if you pay your electrical bill at SM, the points for that go on your rewards card.

    Anyhow, that’s how we roll 🙂

    1. Didn’t know about the BPI and Wells Fargo connection. That’s good info to know. A week for a check to clear is very quick. I’ve heard other banks here take up to 30 days. We use XOOM for our transfers at this time. Once my Social Security benefits kick in, we’ll be exploring other options, and BPI certainly sounds like a good one. Thanks for the info.

  4. It is quick Dave, and being able to see when it clears from home is convenient. Found out about the Wells Fargo connection before moving in country and set up my accounts there. Has been a good payoff so far.

    Speaking of Social Security, I heard, but have not verified that… There is a US Social Security office in Manila. When you initiate your Social Security they will come visit you at your home on their dime. They will help you file for initiation of benefits. ? Only have that info second hand, but have heard it from ex-pats twice now.

    1. Hmmm, I have to contact the Social Security office in Manila in November, Rease, to set up my appointment. The Social Security office is located at the US Embassy. But visit me in Iloilo? That would save me some hassle and money. I’ll have to check that out when I contact them. Here’s what their website says:
      “A unique aspect of the SSA in Manila is the amount of face to face contacts and the field work. Fraud prevention and detection is a major thrust of the operation. Four full time investigators travel throughout the Philippines conducting investigations and also provide service to those individuals who cannot come into the Embassy due to distance, illness, age, etc.”

      Thanks for the info.

  5. Standard & Poor (S&P.)? these are the same people that gave high marks to the derivatives that sent the U.S. economy and the rest of the world into a downward spiral, let us not forget that then the U.S. tax-payers had to bailout the banks, while the bank executives cashed in their bonuses. The fact is that rating agencies get a cut for a good review. I strongly believe that hell is full of bankers, money managers and get-rich-quick scammers.

    1. Yeah, I wouldn’t put much stock in what S&P says anyway, Marty. S&P also raised the Philippines credit rating to investment grade last May. The Philippine credit rating was elevated one level — from Double B Positive to Triple B Negative With a Stable Outlook. But a recent government poll revealed that the poor in the PHL are just as poor as they have been over the last six years. None of these so-called investment upgrades are helping the average Filipino.

  6. Dave,
    That’s great news to hear of the connection between BPI and Wells Fargo. BPI is one of our banks too. Also I have heard about the SS making field visits too. Another 11 more days and we’ll be there, can’t wait. We’re going to Subic tomorrow for a couple days with friends of ours. Just trying to stay busy.

    1. Looking forward to your arrival, PapaDuck. Just telling the Tom Cat this past Friday that you’re coming for a visit shortly. If it’s OK with you, he would like to meet up with us.

  7. Good story Dave, thanks for that…We have Peso account and a US account at BDO and they have been very good to deal with over the years.

    1. Thanks, Philip. We’re going to open a dollar account at BDO soon. We’re very happy with the service we’ve received from them. BDO and BPI are two banks in the Philippines I would recommend doing business with.

  8. Not particularly a believer in gold, but whereas the US IRS requires you to disclose existence of foreign bank accounts, there is no requirement that one disclose the contents of a safety deposit box at a foreign bank.

  9. Dave, the disclosure is on form 1040. You fill it out every year. It requires you to disclose your foreign bank accounts (if the contents of which are substantial and earn interest, that is taxable income) and the phrasing as I recall is “and any other foreign financial instruments”. Meaning foreign brokerage accounts, etc.

    This excludes non financial instruments like gold, rare stamps, and, yes, real estate. A lot of money is leaving the US right now looking for a home in countries where one can own land as a foreigner.

  10. Dave, I just wanted to point out to your readers what the FDIC $250,000 per depositor for each account ownership category means.

    For a married couple, you can have a total of 3 accounts (his, hers and joint account) on the same bank for a total of $750,000.

    And if you have that much money laying around . . . it must be nice. 🙂

    EJ
    Houston, TX

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