Two Philippine banks hit by panic withdrawals

Two Philippine banks hit by panic withdrawals

MANILA (DPA): Two Philippine commercial banks have been hit by heavy withdrawals following the closure of one bank and widespread rumors of more bank runs, officials said Saturday.

Jittery depositors packed several branches of the International Exchange Bank (iBank) and the Philippine Bank of Communications (PBCom) and lined up Friday and until the early hours of Saturday.

Central Bank Deputy Governor Alberto Reyes said the "special operations" of iBank and PBCom were permitted "to pay all those who wanted to withdraw their money", but he stressed that the two banks were financially sound.

The "unusually large cash withdrawals" were apparently in reaction to the closure of Urban Bank, which has been hit by panic withdrawals of nearly half its deposits since last month following its downgrade from a commercial bank to a thrift bank.

The downgrade was imposed after it failed to meet the Central Bank's new higher capital requirements, which were imposed to insulate the banking system from shocks similar to the 1997 Asian financial crisis.

The 28-branch Urban Bank, which has more than 14,000 depositors nationwide, was the largest bank to fall since the Orient Bank shut down in 1998. It has been temporarily taken over by state-run Philippine Deposit Insurance Corp.

On Friday, Central Bank Governor Rafael Buenaventura stressed that there are several existing credit facilities for banks hit by liquidity problems, including loans which could be secured with government securities.

Short-term loans were also available for qualified banks through a rediscounting facility. Banks with special deposit accounts with the central bank can also withdraw them if necessary, Buenaventura said in a statement.