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WHILE ON a recent trip to Japan, I heard a story about an OFW driver who nearly wasted away his earnings. He worked in Japan for close to 30 years, and at one point was earning an equivalent of P400,000 a month with overtime pay. He had a wife and child back home in the Philippines and was able to send his child to school. However, he was always out drinking at bars in expensive Tokyo while having several relationships with other women. "Puro good time," they say.

Well the guy wasn’t able to hold on to his job due to his drinking problem. His employer asked him to resign, and he was given an equivalent of P2 million as separation pay.

 

His Filipino friends could only shake their heads in disbelief at how he wasted away the opportunity to have a well-paying job, and how he was not able to save any money to make his life better. Last they heard, he was back home, bought himself a tricycle which he drives for a living, and is staying with his parents since he could not afford to buy a house of his own.

 

There’s a new trend in the US of companies calling up the relatives of those who have recently passed away, and believe it or not, those who work the phones are getting more success than collecting from those living! Perhaps it’s the approach that they use: absolutely no scare tactics. They sound more like understanding friends who grieve with the bereaved, but gently remind them that paying the debt even in small sums every month would be what the dead would want their relatives to do. Curious whether there is legal accountability among relatives to pay the debts of their dead, I checked with a lawyer and a banker. Answer: none, except a claim on the estate, if there is one. Says Atty. Carlo Cariño, an expert on financial transactions: It is my opinion that credit card obligations are personal to the debtor. Others who are not privy to the contract between the bank and the cardholder can’t be prejudiced. But the bank can claim from the estate of the debtor if there’s any and before it is distributed to the children. From Citibank’s legal department: Q:  Can credit card companies run after the children of seniors who can't pay their debts? A:  Generally no, but there have been cases where the parents refer the creditor to the children for the handling of their indebtedness. It is also possible for children to sign relevant agreement/s, such as promissory note or debt restructuring agreement, as co-maker with the parents under a debt restructuring arrangement with the creditor, which will then make them accountable for the debt. Would you scrimp and save to pay for the debt of your dead relatives?

Time deposits are very popular among Philippine savers, both small and big ones, because they guarantee earnings from cash you are sure to get back after a certain period (normally 30 days, 90 days, and 180 days). That’s of course assuming that you chose the right bank (hello Rural Bank of Parañaque?). I once wrote about a Chinese businessman who lived on his P50 million placed in a time deposit account rolled over regularly. He enjoyed it so much that he believed renting a house for P85,000 a month in a posh Quezon City subdivision was better than buying his own home, because doing so would reduce his stash of cash. In the US, investors maximize time deposits (more commonly known as certificates of deposits) by using a strategy called “laddering.” This simply means spreading your money in CDs with different maturity dates, so that you get regular income from them. By doing this, you make sure that you don’t have to withdraw from your time deposits prematurely and suffer from the steep penalties. I made a few calls to the top three local banks and one thrift bank and here are their time deposit rates: P10,000-below P50,000 BPI –- 2.25% (30 days) -- 2.625% (90 days) BDO –- 1.875% (30 days) -– 2.75% (180 days) -– 2.875% (360 days) Metrobank –- 1.25% (30 days) –- 1.75% (90 days) –- 2% (180 to 364 days) PSBank –- 0.5% (30 days) –- 0.5% (90 days) P50,000-below P100,000 BPI –- 2.5% (30 days) –- 2.75% (90 days) BDO –- 2.25% (30 days) -– 3.25% (180 days) -– 3.375% (360 days) Metrobank – 1.5% (30 days) –- 2% (90 days) – 2.25% (180 days to 3.64%) PSBank –- 1% (30 days to 90 days) P100,000-below P500,000 PSBank –- 3.5% (30 days) –- 2.75% (90 days) BPI -– 2.625% (30 days) -– 2.875% (90 days) BDO –- 2.5% (30 days) –- 3.25% (180 days) -– 3.375% (360 days) Metrobank -- 2% (30 days) –- 2.5% (90 days) -– 2.75% (180 days to 364 days) P500,000 to below P1 million PSBank –- 3.75% (30 days) -– 3% (90 days) BPI –- 2.75% (30 days) -– 3% (90 days) BDO –- 2.5% (30 days) -– 3.25% (180 days) –- 3.375% (360 days) Metrobank –- 2.25% (30 days) –- 2.75% (90 days) –- 3% (180 days to 360 days) P1 million to below P5 million PSbank –- 4% (30 days) –- 3.25% (90 days) BDO –- 3.25% to 3.5% (30 days) -– 3.625% to 3.75% (180 days) –- 3.75% to 4% (360 days) BPI –- 2.875% (30 days) -– 3.125% (90 days) Metrobank -– 2.75% (30 days) –- 3.25% (90 days) –- 3.75% (180 days to 360 days) Some interesting revelations:

1. It pays to shop around for the best rates.
2. Some banks significantly rewards bulk deposits. Note that BPI has the best rates for deposits in the lower brackets but towards the half-a-million-peso level, its rates are taken over by PSBank and BDO.

Computing what you will get in interest Interest rates are annualized. To compute what you will get in interest, use this formula: Interest = (principal x rate x days) / 360 For example: P16,666 = (P5 million x .04 x 30) / 360 That’s the amount you will get if you put your P5 million in PSBank for 30 days at 4% interest. That’s about P200,000 for a one-year placement with simple interest. Remember, however, that earnings from time deposits are taxed with a 20% withholding tax. Are your savings safe? Time deposits are covered by the Philippine Deposit Insurance Corp. up to P250,000 and are thus more or less savings instruments for the ultra-conservative. However, there are also risks involved and these are mostly a result of how you choose your bank. How? Interest rates as of now are market-driven. That means that if I were a bank and I really want your deposits, I would try to best all my competitors and give you the highest rate in the market. To this end, competition among banks is good for depositors. However, some lesser-known banks, knowing their Waterloo, attract deposits by offering higher rates. You, the depositor, then have to make a personal decision whether you would accept the higher risk to get the higher return on your money from a bank with a not-so-stellar track record, management structure or business outlook. In fact, time and again, banks that have been known to close shop because of liquidity problems have offered abnormally high interest rates right before declaring a bank holiday. In MoneySmarts, readers have often pointed out that rural banks give much higher time deposit rates than the big commercial banks. That’s true. Some gave out as high as 18% or 20%, and now you know which banks those were. Most of these banks are now closed. So choose your bank well. Disclosure: MoneySmarts' husband works for PSBank, but has not in any way influenced this article.

This just in: the central bank has approved the Philippine National Bank’s high-yielding, long-term deposit product. Offer size is P5 billion, and the offer will be made before June. Read the news item here. The technical term for the instrument is long-term negotiable certificates of deposit. Yep, the alphabet soup is out again. LTNCDs have become another option for bank depositors wanting more returns for their money. Aside from the following, there are no details yet about the offer:

“Individual investors get the interest coupon tax-free if they hold the LTNCDs to maturity compared to the local central bank's special deposit account (SDA) and government securities, which are subject to the 20 percent withholding tax. Unlike regular deposits, banks are able to offer higher yields on LTNCDs because funds raised from these are exempt from the reserve requirement.”

Will update you once I get to talk to PNB. Here are some related posts and articles about LTNCDs: 1. Your Landbank LTNCD questions answered 2. Gov’t bank targets OFWs with high-yield deposit product 3. LTNCDs: Bank get creative in attracting deposits 4. Chinabank to raise P8B from raising long-term deposit instruments 5. High-yield deposit scheme for OFWs set 6. Metrobank to offer P10B high-yield deposit products

Celso de los Angeles, owner of the Legacy group of companies, appears to be a financial genius. He created a scheme that fell through the regulatory cracks, and stumped both the Securities and Exchange Commission and the Bangko Sentral ng Pilipinas. From the Senate hearings, here is the anatomy of de los Angeles’ perfect scam:

1. His companies sell a pre-need plan to an investor.
2. After some time, another company from the Legacy group, like Legacy Card or Legacy Motors, will buy back the plan and convert it into a deposit-like instrument with very attractive terms. For a P1-million investment, for example, you get P60,000 as advanced interest payment in lump sum and P20,000 a month after that in post-dated checks. That amounts to P240,000 per annum in interest payments alone, or 24 percent per year. On the fifth year, you get your P1 million back plus additional bonus of P200,000.
3. There are other kinds of schemes. Some are double-your-money schemes in three years, some in four. All involve extremely high interest and post-dated checks that can be withdrawn from his rural banks.
4. He folds his pre-need plans, assuring plan holders that they can get their money back because the trust fund is sufficient.
5. Then his rural banks also close shop, with many of his depositors’ money conveniently chopped up into accounts falling under P250,000—the amount insured by the Philippine Deposit Insurance Corp.

Since 2003, both the SEC and the BSP started sniffing into his operations. Whatever happened during their joint meetings, it is apparent that both agencies were at a loss how to deal with the complex financial instruments de los Angeles created. If the plan holder sells his plan to another company, does that still fall under the ambit of the SEC? Please look into it, BSP, the SEC says. Somewhere along the way, the regulatory structure fell silent on what to do and how to deal with this perfect scam. Clearly, BSP and SEC need more power, both legally and structurally, to deal with the complex financial world and criminal minds prowling the streets today. That’s something that lawmakers can solve, if they really have a mind to help the ordinary Filipino investor trying to make his way in this world. An early warning system would protect more investors. Immunity from suits would allow BSP examiners to act more speedily and forcefully. Why not create one financial regulator for the entire financial services industry so that nothing falls through the cracks? But the most potent solution against the perfect scam is this: investor education. If everyone understands what he is getting into, and knows how these types of instruments will fall like a pack of cards bringing his savings down with everyone else's, scams like these will never prosper. Unfortunately, as they say, victims are born every second. Just wait until the next perfect scam comes along.

Malaya Laraya, a registered financial planner, called my attention to what his friend recently experienced with a certain bank. It’s an eye opener, especially since I have often written that if you think you’ll miss payments on your bank loans, it’s better that you call them before they call you. So Aya’s friend decides to pay the bank a visit in the spirit of being proactive with pay-slips and bank statements showing his financial situation in tow. “Much to his chagrin, the bank refused to even discuss the matter.  From the bank’s point of view, there was nothing to discuss as my friend simply just had to pay the loan,” Aya writes. “Now, in better times, the bank could definitely not be faulted for taking such a hard-line stance.  After all, a loan IS a loan.  However, given the extraordinary circumstances we all find ourselves in, (even the bank said that it expects to make much, much less this year due to the crisis) the bank’s refusal to even sit down and discuss possible options strikes me as rather short-sighted to say the least and almost exploitative if you think about it,” Aya adds. If I were Aya’s friend, I would ask to see that bank officer’s boss. I would not stop until I talk to a real decision maker. Then I would tell MoneySmarts which of the banks are that heartless :-D. People need to know which banks know how to discern between someone who is trying proactively to solve a possible problematic situation and borrowers who would just default because they don’t care. After all, the bank loses more if that person defaults, because it will have to write down that loan and that’s a strain on his resources.

In reaction to my previous post, “Tales of woe from Legacy scam victim,” some of you asked whether Letty’s “lucky” that her pre-need plan has been converted to a time deposit because the Philippine Deposit Insurance Corp. (PDIC) will now be required to pay her back. I wish, for Letty’s sake and many others who were caught in the same crazy scam that that will be true. Unfortunately, based on my interviews with sources at the PDIC, it will not be that simple. PDIC is, even as I write, going through the bank’s records with a fine-toothed comb to make sure it pays only “clean” accounts—meaning those that were deposited in good faith, with sufficient documentation (i.e. signature cards), adjusted for all interest due or deducted with loan payments due to the bank. That’s the mandate of the PDIC: pay only real depositors and make sure precious taxpayers’ money is not paid out to fictitious accounts or even to accounts that are the result of fraud. Agents that converted pre-need plans to time deposits, while most likely only following instructions from the owners of the bank, were in fact defrauding the bank. Thus, the possibility for a payout on converted time deposits is slim, my source says. It really doesn’t look too good for planholders of Legacy. ☹ However, depositors in this situation should still try to claim at least their initial deposit. Maybe Letty can get her P25,000, but not the rest of the checks due for payment in five consecutive years. She will lose nothing by going to the bank and presenting documentation of her placements. Here’s a guide for depositors of closed banks and the most common errors claimants make:

1. Bring proper identification. You would think this would be obvious but PDIC says one of the top reasons depositors’ claims could not be processed is the lack of proper identification. Some bring ATM cards, credit cards, or membership cards in clubs. These will not be accepted. You need to bring any two of the following government-issued IDs that are not easily tampered with: SSS/GSIS ID, PRC License, Driver’s License, Senior Citizens ID, Passport, Company ID/School ID, TIN/Philhealth ID, Voter’s ID/Affidavit. If you are filing the claim in behalf of someone else, you need to bring the same thing, plus a special power of attorney. If the owner of the account is abroad, the Philipine Consul where he lives must authenticate the SPA.
2. Bring sufficient evidence of your deposits.  These include savings passbooks, certificate of time deposit, ATM card, unused checks and bank statement, and any other document you might have. The PDIC will be double-checking the consistency of the signature you use in your documents and the one in the bank’s records.
3. You need to fill up three copies of the claim form from the PDIC and sign the “Signature of Depositor/Claimant over Printed Name” under the “To be accomplished by the Depositor/Claimant” portion in the Claim Form. Again, what the PDIC will be putting under the microscope is the integrity of the signature, making sure none are forged.
4. If you are filing in person, you need to go to either the branch of the closed bank where you deposited your money or another site designated by the PDIC, or the PDIC Claims Counter located at PDIC Ayala Extension Office, SSS Building, corner V.A. Rufino St., (formerly Herrera St.), Makati City.
5. You can also process your claim via mail through this address: The Assistant Vice President, Claims Processing Deparment Philippine Deposit Insurance Corporation 2228 Chino Roces Avenue 1231 Makati City, Philippines

You might be surprised, but some do get their money within an hour or so. The entire process will depend on whether your documents are complete and in order, and on the status of the documents within the closed bank. It is not unheard of for bank employees to be in collusion with depositors in “splitting” accounts when they realize the bank is about to be closed. Who’s the loser? Bona fide depositors claiming for deposit insurance as the presence of split and fictitious accounts makes everyone jump through hoops to get their money. Claimants are normally classified into three: “clean”, “document-deficient” and “for further verification”. Only claimants with clean documentation will be paid within an hour or at least the same day. If you belong to the second category, you may be asked to present more documents to prove you are the real owner of the account. If you belong to the third, claim agents will interview you and this is where the actual depositor needs to appear personally. What if your account exceeds the insured amount of P250,000? Strictly speaking, you may still claim for the excess but this means you have to wait until the PDIC has filed with the liquidation court, has already disposed of the bank’s assets, is ready to distribute these assets, and there is enough to go around starting with preferred creditors like the government to ordinary depositors—yes that’s you. Considering that the bank would not go under if it had enough assets for everyone in the first place, then I would say, yes the law says this is possible, but don’t count on it. My source says in the case of the Rural Bank of Paranaque and other banks under the Legacy group that were closed, the verification of documents and claim time is so much longer. They have started payouts for small depositors first (those who have P120,000 and below) last December 22. Those who have more than that will have to wait until mid-February. Claim forms are not yet available, she says. The PDIC website is well-stocked with information. To follow up with the PDIC:

1. Call the claims Processing Department at 841-4604 up to 4607. Try inquiring also at the PDIC Depositors Assistance Bureau at (02) 8414630 or (02) 841-4631. I have dialed these numbers and found that PDIC staff are generally very accommodating and professional.
2. Write to: The Assistant Vice President, Claims Processing Deparment, Philippine Deposit Insurance Corporation, 2228 Chino Roces Avenue 1231 Makati City, Philippines
3. Inquire in person at the PDIC Ayala Extension Office, 6th Floor, SSS Building, V.A. Rufino St. (formerly Herrera St.) cor. Ayala Avenue, Makati City, Philippines,
4. Make sure you have the following information ready at all times: name of the closed bank, name of the depositor; and claim number which is found on the upper right hand corner of the claim stub.

Sample computations of how much you will get can be found here.  Here’s hoping you would never need this information in the future! ☺

You don’t approach a “bank holiday” with anticipation; you think of it with trepidation. There are no party hats, treats and food. There’s confusion. Even anger and frustration. As bankers and the media use this expression, it refers to a regular banking day when a bank closes its doors and refuses to service depositors, normally because of liquidity (cash) problems. The Rural Bank of Subangdaku did not open its doors last December 11, leaving depositors “out in the cold” and yet the administrative officer didn’t want to call it a bank holiday. Whatever you want to call it, a bank holiday is a bank holiday is a bank holiday. The worst bank holiday I can remember is Banco Filipino’s self-imposed one on July 23, 1984. I can still remember the Sanrio passbooks brought by children to the branches. Any experiences you have had with bank holidays?

In this day and age of innovation and creativity, I have learned that some criminals have found amazing use for rulers and even the humble Scotch tape. By simply inserting these inside the cash dispenser of old-style ATM machines, a person without scruples can get money from the next unsuspecting bank client. Here’s how it works: The guy without scruples pretends to use the ATM, but actually inserts a ruler, Scotch tape or some other item to capture the money that comes out of old-style ATM machines. I’m talking about the ones where your bills fall from the dispenser. Then the next client, you for example, steps in and withdraws money. The machine says transaction is finished successfully, you hear the whirr of the machine as it counts your bills but you don’t see any moolah come out of the machine. You leave in consternation and calls the bank. The robber comes back to remove the ruler or tape and gets away with your money. This would be solved by two simple things: for banks to invest in more modern machines and for banks to comply with Bangko Sentral ng Pilipinas requirements to have a CCTV camera attending to each ATM. That would at least give the bank a face to run after and prove to them that your claim is legitimate. Unfortunately, not all banks comply with the central bank directive, I was told. As the Christmas season draws near and you find yourself in need of cash, transact using ATMs that are well lighted, choose banks that invest in modern equipment and comply with central bank regulations. The bank may, in the end, still pay you the amount lost through these heists, but who would like the hassle of going after money that’s actually yours?

…gross domestic product grew 4.6% in the third quarter despite all the pessimism, talks of gloom and doom and actual recession in more advanced economies of the US, Japan and European countries. The figure is in the upper end of the government projection of 4.0% to 4.6%. Still, this is quite a drop from the 31-year peak of 7.2% in 2007. The fourth quarter, although seasonally a good quarter for the economy because of Christmas spending and stuff, might be gloomier if people keep postponing their spending to wait for prices to go lower (like that LCD television that was at P120,000 early this year but is now at P100,000, zero percent interest for 24 months. So, maybe I should change my tune a little bit and say: hey guys, if you have the money, go shopping to save the economy! Hehe.

***

…some analysts actually believe the bear market is over, stock prices have bottomed out, but that this does not mean the bull is ready to charge. So, as my editor-in-chief JV Rufino asked when I told him about the news, what do you call a market that is neither a bull nor a bear?

***

…if you have investments in the stock market, you belong to less than half of one percent of the total population of the Philippines that are into equities! Citiseconline.com only had 6,000 customers in 2007 and only 15% of them traded at least eight times in a month.

***

…I am starting to believe I am jinxed! Well, the good news is that a few minutes (yes, minutes) after I blogged about BPI’s online banking service, someone from the bank called me up at home (should I be scared or impressed? honestly, I'm more impressed than worried) and tried to help me with my problems. A few days after, he called me again as promised and told me the account linked to my online banking facility was inactive, hence the error messages. (the phone banker sounded as puzzled as I was by the explanation of their IT guys).  I took note of the instructions he gave and resolved to follow them religiously. Finally, yesterday, I was ready to look at my account. Lo and behold, I forgot my password and got locked out! (that was totally my fault). So, I called up the 89-100 hotline today and what message did I get? “Ma’am, we are having a problem with our system so can you please call us again in an hour?” Strangely, I am not really upset. But I think I am so totally jinxed. *** …when you call an OFW abroad through their phone with roaming capabilities, he pays through the nose just to receive your call and you pay IDD rates on your phone. Ouch! If you have Globe’s family sim pack, the best way to maximize the entire package is for the OFW to buy another sim with Globe’s telco partner in that country. You can send him a text message for P1, he can reply using text. The two sims used by relatives here can benefit from “unli text plans” but to call home, he should use his co-branded sim. OneAyala privilege card, by the way, was relaunched today with more benefits! It's a discount card that's also an ATM through which Filipino expats abroad (I like the sound of that more than OFW) can use to remit money to the Philippines. Check out some of the noteworthy discounts below (others I did not include were blah):

• "preferential rates" on international and domestic tickets and packages from Fiesta Tours and Travel and discounted rates on passporting and documentation,
• deluxe room at P6,200++ and the Club Room at P8,500++ at Hotel Intercontinental and complimentary one-way transfer from airport to hotel for a minimum of 3 nights stay and 20% discount on all food and beverage outlets
• 10% off on existing rates on Deluxe and Suite rooms at Marriott in Cebu City and 10% discount in all food and beverage outlets
• 5% discount on purchases at Fiesta Mall Duty Free
• Free Hanabishi Rice Cooker for every single-receipt purchase of P15,000 at Abenson
• P200 worth of load for only P160 in Timezone
• one free donut for every dozen bought at Mister Donut
• Free one-year personal accident insurance worth P100,000 for every Ayala Life policy purchased, and
• One free money transfer to the Philippines from anywhere in the world from Xoom.