Fewer depositors were hit by a smaller number of bank shutdowns this year.

A member of House of Representatives has nonetheless called for stronger precautionary actions in order to deter unsound and fraudulent banking practices moving forward.

“No effort should be spared in running after bank officers who committed fraud or other violations of [banking] laws,” said LPG-MA Rep. Arnel Ty, a member of the Congress committee on banks and financial intermediaries.

“We have to build up public confidence in our banks, so as to aggressively promote savings and support responsible credit, and also to help keep the public away from rip-offs like the Aman Futures Group investment scam,” Ty said.

The lawmaker also urged depositors to shun banks offering to pay unusually high interest rates on deposits.

“In some cases, excessive interest rates on deposits might be a red flag. It may be a signal that the lender is facing potential liquidity issues,” said Ty, author of House Resolution 1749, seeking an inquiry, in aid of legislation, into the banking industry’s condition.

The Bangko Sentral ng Pilipinas last reported that 2.96 percent an annum was the weighted average interest rate offered by all commercial banks on peso time deposits.

The central bank shut down 24 banks this year with some P19.5 billion in combined deposits and over 120,000 accountholders.

The failed Export and Industry Bank accounted for the bulk of deposits lost and accountholders hit, at P15.98 billion and 50,092, respectively.

Under the law, unsafe banking activities include the excessive reliance on large, high-cost or volatile deposits or borrowing, including the offering of interest rates on said funds that are 50 percent higher than current industry rates.

The undue dependence on solicitation and acceptance of brokered deposits and spending large sums on commissions and referral fees to generate deposits may also constitute unsound banking practices.    

Meanwhile, Ty credited the state-run Philippine Deposit Insurance Corp. (PDIC) for efficiently repaying insured deposits.

“The feedback we received is that PDIC has been fairly swift in making repayments, with respect to small depositors whose papers are in order,” he said.

In 2011, the central bank closed down 29 banks, including two large thrifts—LBC Development Bank and Banco Filipino Savings and Mortgage Bank. Over 500,000 accountholders with over P15 billion in combined deposits were hit.

The central bank shuttered 32 mostly rural banks in 2010.