The Bangko Sentral ng Pilipinas (BSP) has implemented interest rates on savings deposits that range from a mere 0.10 percent to 0.25 percent per annum, after deducting taxes at a rate of nearly 10 percent. Conversely, when banks utilize these deposits for loans obtained by depositors or the general public, the interest rates skyrocket to an astonishing 18 percent to an appalling 28 percent per annum. It is worth noting that the usury law prohibits the charging of interest exceeding 12 percent per annum. However, the BSP seems to have disregarded this law, allowing for arbitrary and excessive profiteering by its privileged constituents. This also seems to have legitimized the “Bombay 5-6” lending scheme, which operates outside the banking system and charges a whopping 20 percent interest rate per month.
Fortunately, the Supreme Court has intervened in numerous cases to nullify exorbitant interest rates, such as 36 percent, 66 percent, and 77 percent per annum. While these rates were not considered “illegal,” they were deemed “unconscionable.” As per the prevailing legal principles, banks are granted the freedom to charge any interest rate on loans, as long as it does not fall under the category of “unconscionable,” which is determined by the courts. If the courts determine a rate to be “unconscionable,” the loan transaction is treated as if no interest had been agreed upon in writing. In such cases, Article 1956 of the Civil Code applies, which states that no interest is due unless expressly stipulated in writing. Consequently, if the stipulation is considered “unconscionable” and unenforceable, it should be declared void and non-existent. However, the Supreme Court has ruled that since there was still a stipulation in such cases, the imposed interest rate should be limited to 12 percent per annum.
In recent news, BSP officials were identified as the “highest-paid public officials” as of last year. For instance, former BSP governor Felipe Medalla received close to P35 million, whereas Finance Secretary Benjamin Diokno received close to P30 million. Diokno was previously in charge of the BSP and had already accumulated over P40 million in 2021 alone. Other BSP officials, along with high-ranking public servants, have likewise taken advantage of exorbitant compensation packages funded by taxpayer money, despite the country’s staggering debts amounting to over P12 trillion. This raises the question of whether the banking system primarily benefits the wealthy, disregarding the interests of ordinary depositors. Shouldn’t there be a congressional act to raise the interest rates on savings deposits to a more reasonable level? Currently, only around 30 percent of the adult population in the country’s banking system show enthusiasm for depositing their savings in banks.
Recalling the events of the 1970s, when Banco Filipino disrupted the banking system by attracting a significant number of depositors with an attractive annual interest rate of about 12 percent, it is evident that mainstream banks were alarmed by losing their depositors. The BSP swiftly intervened and dismantled Banco Filipino. Ultimately, it appeared that the BSP prioritized the well-being of billionaire owners of financial institutions over that of ordinary depositors. One might question the slogan “Para sa ikauunlad ng bayan, mag-impok (daw) sa bangko” (For the nation’s progress, save in banks). Perhaps it is time to consider reducing the scandalously excessive emoluments of BSP officials by half, at least until a significant portion of the country’s enormous debts is settled. This would demonstrate their love for the Philippines.
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