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RECOVERIES OF CREDITORS’ CLAIMS AGAINST CLOSED BANKS UNDER PHILIPPINE SETTING


Marinor A. Gallardo-Quintilla

The Graduate School, University of Santo Tomas, Manila, Philippines

Tomas Tiu

The Graduate School, University of Santo Tomas, Manila, Philippines

Enrico Torres

The Graduate School, University of Santo Tomas, Manila, Philippines


ABSTRACT

Bank closures happen globally due to legal grounds that vary among countries. The adverse effects common to all bank closures include loss of employment, disruptions in the payment and settlement system, loss of public confidence in the stability of the banking system, bank runs, systemic risks and losses imposed on uninsured depositors and other creditors. The researcher’s goals are the minimization of losses imposed on the uninsured depositors and other creditors and expeditious recoveries of their claims. Indicators of bank insolvency and their impact on the recoveries of creditors’ claims against the assets of closed banks under PDIC liquidation have been examined.  Using the Pearson correlational analysis, findings reveal significant statistical link between the liabilities and realizable assets to recoveries of 577 closed banks as of yearend 2011.  Findings also show that high debt ratios of 386 or 67% of the 577 closed banks indicated that their liabilities exceed the value of their realizable assets.  Thus, these banks cannot pay all their debts, thereby, imposing losses on uninsured depositors and other creditors.  To conclude, the researcher recommends that bank regulators should jointly prepare draft bills to be presented to the government legislative branch for reforms in the traditional bank closure practices and in the implementation of the liquidation processes that are detrimental to the best interest of uninsured depositors, creditors and the general public.


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