With their assets overvalued at about P19 billion, the Philippine Deposit Insurance Corp. (PDIC) will lose about P9 billion from the collapse of 12 rural banks affiliated with the Legacy group.

Top officers of the PDIC said on Wednesday that even if all assets of these banks are liquidated, all they can fetch from the market is P10 billion.

The collapsed banks’ consolidated statement of condition recorded total assets at P19.82 billion, but after verification and evaluation by receivers of PDIC, the consolidated assets were found to be worth only P856 million.

”The overstatement implies that estimated realizable assets of the 12 Legacy banks combined will be less than 10 percent of the recorded total assets,” said PDIC president Jose Nograles.

Of the P14 billion insured deposits in Legacy banks, he said accounts worth P10.7 billion had been verified to be valid after the first validation phase completed last month. These deposits will be placed under a second round of validation.

”It is not enough that we validate the deposit accounts, we also need to validate the claimants to ensure that we pay the right owner of the account,” added Nograles.

 The estimated payout of P10.7 billion, he said, is the biggest ever for PDIC and may increase if other insured deposit accounts are eventually validated.

The banks’ financials may still be adjusted, he said, once the results of the forensic investigation by an external audit firm on the banks are completed.

If PDIC is able to sell the banks’ assets and raise as much as P856 million from the transaction, then the “hit” for the agency will be a little less than P10 billion after subtracting the proceeds from the estimated payout of P10.7 billion. “PDIC will bear a heavy hit on its Deposit Insurance Fund.”

But the availability of money for the payout is not a problem because the covering insurance fund had swelled to around P70 billion as of end-August, he said.

This means, however, that uninsured depositors and other creditors of the Legacy banks will also take a hit as recoveries from liquidation are expected to be nil, according to PDIC executive vice president Imelda Singzon.

In March Nograles said some P6 billion in insured deposit accounts in the Legacy banks had been found to be “doubtful” because of incomplete records and questionable transactions but some of these accounts had since been validated.

A number of these “doubtful” accounts had either been referred for legal resolution or had remained as accounts with incomplete documents.

Of the total number of accounts, 14,019 with total recorded deposits of P1.8 billion had been referred for resolution of legal issues, while 8,124 accounts with deposits totaling P1.15 billion remain initially to have incomplete bank records.

Accounts numbering 2,719 representing P374 million deposits had been denied—referring to those “rejected or declared untrue” and had been found to be “the result of fictitious or fraudulent transactions.”

Nograles said the completion of the validation process will significantly hasten the processing of claims. As of end-August, PDIC had received a total of 114,721 insurance claims for P12.6 billion, of which 24,125 claims for P1.43 billion had already been paid.

He said PDIC had targeted to complete the examination of all deposit accounts in the Legacy banks by the end of July but incomplete documents and missing records had slowed down the process.