Philippine Deposit Insurance Corporation (PDIC)

Basic policy Deposit liabilities required to be insured with PDIC

• Promote and safeguard the interest of the depositing public by way
of providing permanent and continuing insurance coverage on all 1. The term “ deposit” means the unpaid balance of money or its
insure deposits. equivalent received by a bank in the usual course of business and for
which it has given or is obliged to give credit to a commercial, checking,
Concept of insured deposits savings time or thrift account.

1. The term “Insured deposits” means the amount due to any bona fide 2. The deposit must give rise to creditor-debtor relationship between
depositor for legitimate deposits in an insured bank net of any the bank and the depositor.
obligation of the depositor to the insured bank as of the date of the
closure but not to exceed P 500,000. 3. Deposits in a branch of domestic bank outside the Philippines shall
not be covered unless the insured bank elects to include the same for
2. The term “deposit” means the unpaid balance of money or insurance subject to approval of the PDIC.
equivalent received by a bank in the usual course of business and for
which it has given or is obliged to give credit to a commercial, checking, Commencement of liability
savings, time or thrift account or which is evidenced by passbook, 1. PDIC shall commence the determination of insured deposits due to the
check and/or certificate of deposit printed or issued in accordance depositors of the closed bank upon its ACTUAL take-over of the closed
with Central bank rules and regulations and other applicable laws, bank.
together with such other obligations of a bank which, consistent with
banking usage and practices, the board of directors shall determine and 2. Under its charter (RA 3591), PDIC is liable only for deposits
prescribe by regulations to be deposit liabilities of the Bank. PDIC vs. CA received by a bank “in the usual course of business”. Even though a
1998 bank was prohibited by CB from doing further business on the ground of
insolvency, the bank and its clients could be given the benefit of the
Liability to depositors doubt that they were not aware that the Monetary Board resolution
had been passed, given the necessity of confidentiality of placing a
1. PDIC can only be liable if banking institution under receivership. If on the next banking day
a. the insured bank actually receives deposit and following the issuance of the Monetary Board Resolution, the epositor
b. the bank is ordered closed by BSP. PRE-TERMINATED his time deposits and RE-DEPOSITED the funds
into smaller denominations; said deposits were STILL for a
2. Where no deposit (as defined in Section 3(f) of Republic Act No. consideration and COVERED by the PDIC insurance coverage. PDIC
3591) came into existence, PDIC cannot be held liable for the value of vs. CA (2003)
time deposit certificates.
Deposit accounts not entitled to payment
The LIABILITY of PDIC for insured deposits is STATUTORY and under *PDIC shall not pay deposit insurance for the following accounts or
RA 3591, as amended, such liability RESTS UPON THE EXISTENCE with transactions whether denominated, documented, recorded or booked as
the insured bank, NOT on the negotiability or non-negotiability of deposit by the bank;
the certificates evidencing these deposits. PDIC vs. CA 1998

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 1. investment products such as bonds and securities, trust Mode of payment
accounts, and other similar instruments; • Whenever an insured bank shall have been closed by the MB, payment
2. deposit accounts or transactions which are unfunded, or that of the insured deposits shall be made by PDIC as soon as possible either
are fictitious or fraudulent; by
3. deposit accounts or transactions constituting unsafe and • 1) cash or
unsound banking practices as determined by PDIC, in • 2) making available to each depositor a transferred deposit
consultation with BSP, after in another insured bank in an amount equal to insured deposit
• a. due notice and hearing, and of such depositor, subject to submission of proof of claims.
• b. publication of a cease and desist order issued by
the PDIC against such deposit accounts or transactions; Effect of payment of insured deposits
and • PDIC, upon the payment of any depositor, shall be subrogated to all
4. deposits that are determined to be the proceeds of an the rights of the depositor against the closed bank to the extent of such
unlawful activity as defined under the Anti-Money Laundering payment.
law • Subrogation shall include the right on the part of PDIC to receive the
same dividends from the proceeds of the assets of such closed bank
Extent of liability Determination of insured deposits; Calculation of and recoveries on account of stockholders’ equity as would have
liability; per depositor, per capacity rule; joint accounts been payable to the depositor on a claim for the insured deposit
• but such depositor shall retain his claim for any uninsured portion
1. Deduct any loan of the depositor from the deposit with the insured of his deposit.
bank to determine net insured deposit
2. Individually owned deposit account is insured separately from joint Failure to settle claim of insured depositor
accounts regardless of whether the conjunction “ and “, “ or “ , “ and/or “ • The failure to settle the claim within six months from date of filing of
is issued. In determining such amount due to the depositor, there shall the claim for insured deposit whether such failure was due to grave
be added together all deposits in the bank maintained in the same abuse of discretion, gross negligence, bad faith or malice shall, upon
right and capacity for his benefit conviction, • subject the directors, officers or employees of PDIC
either in his own name or in the name of others. responsible for the delay, to mprisonment from six months to one year;
3. if the account is held jointly by two or more natural persons or two • provided that the period shall not apply if the validity of the claim
or more juridical entities, the maximum insured deposit shall be requires the resolution
divided into as many equal shares as there are many individuals or of issues of facts and/or law by PDIC or another office, subject further
juridical entities, unless a different sharing is stipulated in the deposit to the remedy of PDIC to require final determination of a court of
document. competent jurisdiction if PDIC is not satisfied as to the viability of the
4. If the account is held by a juridical person jointly with a natural claim for insured deposit.
person, the maximum insured deposit shall be presumed to belong
entirely to the juridical person. Failure of depositor to claim insured deposits
5. The aggregate of the interests of each co-owner over several joint • Unless otherwise waived by PDIC, if the depositor in the closed bank
accounts, whether owned by the same or different combination of shall fail to claim his insured deposit with PDIC within two years from
individuals, juridical persons or entities shall likewise be subject to the actual take over of the closed bank by the receiver or does not enforce
maximum insured deposit of P500,000. his claim filed with PDIC within two years after the two year period to

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file a claim, all rights of the depositor against the PDIC with respect to constitutional issues such that unless a TRO is issued, grave injustice
the insured deposit shall be barred; or irreparable injury will arise.
• GR: The actions of PDIC with respect to determination of insured deposit
• however, all rights of the depositor against the closed bank and its accounts shall be final and executory and may not be set aside or
shareholders or the receivership estate to which the PDIC may have restrained by the court
become subrogated shall thereupon revert to the depositor. • XPN: except on petition for certiorari on the ground that the action
was taken in excess of jurisdiction or with grave abuse of discretion
Examination of banks and deposit accounts as to amount to lack or excess of jurisdiction.
• PDIC may conduct examination of banks with prior approval of the • The petition for certiorari may only be filed within 30 days from notice
MB of denial of claim for deposit insurance.
• provided that no examination can be conducted within 12 months
from the last examination date;
• provided however that PDIC may, in coordination with BSP conduct a
special examination if there is a threatened or impending closure
of a bank.
• Notwithstanding RA 1405, RA 8791, RA 6426 and other laws, PDIC
and/or BSP may inquire into or examine deposit accounts and all
information related thereto in case there is a finding of unsafe and
unsound banking practice**

Prohibition against splitting of deposits

• Splitting of deposits occurs whenever a deposit account with an
outstanding balance of more than the statutory maximum amount of
insured deposit maintained under the name of natural or juridical
persons is
• broken down and transferred into two or more accounts in the
name/s of natural or juridical persons or entities who have no
beneficial ownership on transferred deposits in their names
• within 120 days immediately preceding or during a bank declared
holiday or immediately preceding a closure order by the BSP
• for the purpose of availing of the maximum deposit insurance
coverage.
• Such splitting of deposit is punishable by imprisonment and/or fine.
Prohibition against issuance of TRO
• No court, except the Court of Appeals, shall issue any temporary
restraining order, preliminary injunction or preliminary mandatory
injunction against PDIC for any action on its part under the PDIC charter.
• The Supreme Court may issue a temporary restraining order or
injunction when the matter is of extreme urgency involving a

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1. X, a bank depositor has a P15,000 savings deposit and a P20,000 time deposit namely: P200,000 in time deposit; P100,000 in current deposit; and P50,000 in
with a bank. If the bank becomes insolvent, and is closed by the Government, how savings deposit. Under the PDIC law, how much, if any, could she recover from
much if any, is the guaranteed amount he can obtain as a each of the 3 separate accounts? Explain.
matter of right for the two accounts? Explain.
Answer:
Answer: Under the PDIC law, Elizabeth Diaz, although having 3 separate deposit accounts
He can only obtain P10,000 as a matter of right, by way of guarantee. Under the in her name, totaling P350,000, in the Oriental Bank which was ordered close by
Philippine Deposit Insurance Act, the maximum amount covered by insurance is the Central Bank, can recover only the aggregate amount of P40,000 because the
P10,000. And by express provision of law, this includes all kinds of deposits— maximum amount of the insured deposit of any depositor, not for every account
savings current as well as time deposits—in the name of or for the benefit of one of a depositor in the bank, is only P40,000.
person. (BAR 1975)
Note: Section 4 (g) of RA No. 9302 provides that the term “insured deposits”
Note: The term “insured deposits” means the amount due to any bona fide means the amount due to any bona fide depositor for legitimate deposits in an
depositor for legitimate deposits in an insured bank net of any obligation of the insured bank net of any obligation of the depositor to the insured bank as of the
depositor to the insured bank as of the date of the closure but not to exceed date of the closure but not to exceed P500,000.00. (BAR 1985)
P500,000. (Sec.4 (g), RA 9302)
4. An employee of a large manufacturing firm earns a salary which is just a bit
2. The Deposit Insurance Law insures deposits up to P10,000.00 per depositor. more than what he need for a comfortable living. He is thus able to still maintain
X has three separate deposits in a single bank, namely, P15,000.00—Savings a P10,000 savings account, a P20,000 checking account, a P30,000 money market
Deposit; P15,000.00—Current Deposit (checking account). Later on, the bank placement and a P40,000 trust fund in a medium-size commercial bank.
ran into financial trouble and was ordered by the Central Bank to close and State which of the four accounts are deemed insured by the PDIC?
liquidate. How much may X recover? Answer with reasons.
Answer:
Answer: The P10,000 savings account and the P20,000 checking account are deemed
X may recover only up to P10,000.00. According to Sec. 3(f) of the Deposit insured by the PDIC. (BAR 1997)
Insurance Corporation Act the term “deposit” means the unpaid balance of
money or its equivalent received by a bank in the usual course of business and 5. When OCCIDENTAL Bank folded up to insolvency, Manuel had the following
for which it has given or is obliged to give credit to a commercial, checking, separate deposits in his name; P200,000 in savings deposit; P250,000 in time
savings, time or thrift account or which is evidenced by its certificate of deposit, deposit; P50,000 in a current account; P1 M in a trust account; and P3 M in money
and trust funds held by such bank x x x. “The fact therefore that X has savings, market placement. Under the PDIC Act, how much could Manuel recover?
time, and current deposits in the same bank is immaterial. They all came under
the same heading of deposit” Answer:
Manuel can recover P500,000 because this is the total of his savings deposit, time
In Sec. 3(g) of the same Act, the term “insured deposit” is defined as the net deposit and current account. The trust account and the money market
amount due to any depositor for deposits in an insured bank (after deducting placements are not included in the insured deposits. (BAR 2010)
offset) less any part thereof of which is in excess of P10,000.00 x x x.” Likewise,
Sec. 10(a) thereof, insofar as pertinent provides: “That the maximum amount of 6. X is a depositor of AAA Bank. She has 3 deposit accounts all under her name.
the insured deposit of any depositor shall be P10,000.00”. Evidently, irrespective One, in checking account, one in saving account and another one in time deposit
of kinds of deposits of a particular depositor and the total amount account. Each account has a balance of P250,000. AAA Bank became insolvent.
corresponding to the same, he is entitled to recover only up to P10,000.00 in case PDIC closed the Bank. X therefore is unable to withdraw from all of the accounts.
of closure and liquidation of the bank. (BAR 1977) She then filed her claims with the PDIC. Which statement is most accurate?
Answer:
3. When Oriental Bank was ordered close by Central Bank on May 15, 1985, a) X can claim a total of P500,000 for all 3 accounts. (BAR 2012)
Elizabeth Diaz had 3 separate deposit accounts in her name with the same bank,