Editorial

Aggression

When a chain of rural banks went on bank holiday last month, sending thousands of small-time depositors on panic mode, the governor of the Bangko Sentral assured the public that the problem was isolated to the Legacy group and that the banking system in the country remained stable.

At least 18 banks have been taken over by the central bank in the last six weeks, and while the public has yet to see the official statement of findings on the cause of the failures, some patterns are emerging.

It would have been easy to blame the economic crisis gripping the world; that would have relieved local bankers and authorities of some accountability for the closures. The problem, however, appears to be internal to some Philippine banks.

Now the Monetary Board is crafting a set of guidelines that defines ?aggressive banking? and lays down penalties for predatory bankers.

Many depositors were reportedly enticed into placing their money on the closed banks through ?the antics of self-styled bankers.? These bankers took advantage of the existing guidelines on banking practices which could be interpreted in many ways.

In contrast, ?the guidelines in past circulars were implicit. In the new guidelines, the rules are now clearly spelled out,? says the deputy governor of the central bank, Nestor Espenilla.

The proposal will hardly be a consolation to those who have been unfortunate enough to put their funds in the closed banks. But it will help ensure a safer environment for the rest of the public. It will also reinforce people?s continued confidence in the banking system.

Still, such a guideline will remain just that?a set of rules? if not communicated effectively to the public, especially those lacking in sophistication to distinguish between legitimate business and lofty promises.

As the regulator of the banking industry, the central bank must likewise engage in an aggressive information campaign to make people aware of the traps they could fall into and the courses of action they should take in the event of such.

By this we mean more than regular updates to its Web site or statements to the press. There are millions of vulnerable depositors in the countryside, without access to the Internet, print or broadcast media, that authorities are also mandated to protect.