Philippine Deposit

Insurance
Corporation
Regulatory Framework and
Legal Issues in Business
 A Brief History
• Just like in the United States of America, deposit
insurance in the Philippines was borne out of the need to
stabilize the banking system from a rash of withdrawals
that led to bank runs. In the US, disruptions caused by
bank failures recurred during the 1800s up to the 1930s.
While numerous solutions were put forth, many of them
were based on the deposit insurance principle.
• Solutions to stabilize the US banking industry were
originally implemented at the level of the State and
initially solicited support from banks on a voluntary basis.
 A Brief History
• As the banking crisis in the US worsened in the 1930s,
the US Congress passed the Banking Act of 1933, which
created the Federal Deposit Insurance Corporation
(FDIC). By its very name, the FDIC provided deposit
insurance on a national level, starting at USD2,500 per
depositor and made membership by banks mandatory.
 A Brief History
• Thirty years later, the Philippines went through a similar
banking crisis. In order to stabilize the situation and
restore confidence in banks, the Philippine government
created its own version of deposit insurance system
through Republic Act 3591, which created the Philippine
Deposit Insurance Corporation (PDIC) on June 22, 1963
to protect depositors and help maintain financial stability.
Unlike the Federal Deposit Insurance of the US, the
Philippines initially adopted a voluntary membership by
banks in the PDIC.
 A Brief History
• Mr. Basilio Estanislao, then Special Assistant to Central
Bank Governor Andres Castillo and later Director of the
PDIC itself, was tasked to prepare the manuscript for
Republic Act 3591. Director Estanislao was quoted to
have said that: “The philosophy behind deposit
insurance is for the government to protect the small,
unsophisticated depositors who comprise the majority,
and not the big ones who are more discriminatory.”
 A Brief History
• The foundation for this statement of Director Estanislao
is confidence, the major ingredient that makes any
financial system flourish. Take confidence away and the
financial system crumbles like a house of cards. This is
also why President Franklin D. Roosevelt in his first
“fireside chat” to the people of the United States of
America on March 12, 1933 said that: “After all, there is
an element in the readjustment of our nancial system
more important than currency, more important than gold,
and that is the condence of the people.”
 A Brief History
• The PDIC commenced operations in 1968 after the
appointment of the Board of Directors and the release of
the PDIC’s initial permanent insurance fund in the
amount of Php5 million. A year later, Republic Act 5571
made banks’ membership with the PDIC mandatory.
Thereafter, a series of government actions led to the
increase in the maximum deposit insurance coverage for
depositors. Starting with just a maximum deposit
insurance coverage of Php10,000 under Republic Act
3591, the maximum deposit insurance coverage was
raised as follows: (see Table 1)
A Brief History
 A Brief History
• The PDIC Charter was further amended in 2009 as a
pre-emptive measure to build confidence in the banking
system amid the brewing global crisis during that time.
Aside from the doubling of maximum deposit insurance
coverage from Php250,000 to Php500,000, the PDIC
was granted the flexibility to adjust the maximum deposit
insurance coverage when the financial stability of the
banking system is threatened.
 A Brief History
• The latest amendments to the PDIC Charter also
provided for institutional and financial strengthening
measures to build up the Deposit Insurance Fund and to
reinforce PDIC’s role as a member of the country’s
financial safety net while continually providing depositor
protection. PDIC’s co-regulatory powers were also
expanded in terms of determining insured deposits,
examining deposit accounts in cases of finding of unsafe
and unsound banking practices, and conducting special
bank examinations.
 Frequently Asked Questions

• What is the Philippine Deposit Insurance Corporation

(PDIC)?
• PDIC is a government instrumentality created in 1963 by
virtue of Republic Act 3591 to insure the deposits of all
banks which are entitled to the benefits of insurance.
The latest amendments to RA 3591 are contained in RA
10846 signed into law on May 23, 2016. RA 10846
empowered PDIC with stronger authorities to protect the
depositing public and promote financial stability. The new
law also includes important provisions to ensure that the
PDIC remains financially and institutionally strong to
fulfill its mandate under its Charter.
 Frequently Asked Questions

• What is the Philippine Deposit Insurance Corporation

(PDIC)?
• The PDIC now has the authority to help depositors have
quicker access to their insured deposits should their
bank close; resolve problem banks while still open;
hasten the liquidation process for closed banks; and
mete out stiffer sanctions and penalties against those
who engage in unsafe and unsound banking practices.
• The PDIC is an attached agency of the Department of
Finance.
 Frequently Asked Questions

• What is PDIC’s overall mandate?

• PDIC exists to provide deposit insurance coverage for
the depositing public to help promote public confidence
and stability in the economy. It ensures prompt payment
of insured deposits, exercises complementary
supervision of banks, adopts responsive resolution
methods, and applies efficient management of
receivership and liquidation functions.
 Frequently Asked Questions

• What are the functions of PDIC?

• Deposit Insurer
• Co-regulator of Banks
• Receiver and Liquidator of Closed Banks
 Frequently Asked Questions

• What is PDIC’s maximum deposit insurance coverage?

• Effective June 1, 2009, the maximum deposit insurance
coverage is P500,000 per depositor. All deposit accounts
by a depositor in a closed bank maintained in the same
right and capacity shall be added together.
• Under R.A. No. 9576, the PDIC may propose to adjust
the MDIC, subject to the approval of the President of the
Philippines, in case of a condition that threatens the
monetary and financial stability of the banking system
that may have systemic consequences.
 Frequently Asked Questions

• What is an insured deposit?

• The term ‘insured deposit’ means the amount due to any
bona fide depositor for legitimate deposits in an insured
bank net of any obligation of the depositor to the insured
bank as of date of closure, but not to exceed
P500,000.00.
• A joint account shall be insured separately from any
individually-owned deposit account.
 Frequently Asked Questions

• What is an insured deposit?

• R.A. No. 9576 stipulates that PDIC will not pay deposit
insurance for the following accounts or transactions:
• Investment products such as bonds, securities and trust
accounts;
• Deposit accounts which are unfunded, fictitious or
fraudulent;
• Deposit products constituting or emanating from unsafe
and unsound banking practices;
• Deposits that are determined to be proceeds of an
unlawful activity as defined under the Anti-Money
Laundering Law.
 Frequently Asked Questions

• Are all banks members of PDIC?

• Membership of banks to PDIC is mandatory; hence, all
operating banks are members of PDIC.
 Frequently Asked Questions

• What types of deposits are insured by PDIC?

• Except for the exclusions stipulated in RA 9576, deposits
of all commercial banks, savings and mortgage banks,
rural banks, private development banks, cooperative
banks, savings and loan associations, as well as
branches and agencies in the Philippines of foreign
banks and all other corporations authorized to perform
banking functions in the Philippines, are insured with
PDIC. As for Philippine banks with branches outside the
country, RA 9576 stipulates that subject to the approval
of the Board of Directors, any insured bank with branch
outside the Philippines may elect to include for insurance
its deposit obligations payable at such branch.
 Frequently Asked Questions

• What types of deposits are insured by PDIC?

• Foreign currency deposits are also insured by PDIC
pursuant to RA 6426 (“An act instituting a foreign
currency deposit system in the Philippines, and for other
purposes”) and Central Bank (CB) Circular No. 1389.
Depositors may receive payment in the same currency in
which the insured deposit is denominated.
 Frequently Asked Questions

• What types of deposits are insured by PDIC?

• Exclusions from deposit insurance coverage as
stipulated in R.A. No. 9576:
• Investment products such as bonds, securities and trust
accounts;
• Deposit accounts which are unfunded, fictitious or
fraudulent;
• Deposit products constituting or emanating from unsafe
and unsound banking practices;
• Deposits that are determined to be proceeds of an
unlawful activity as defined under the Anti-Money
Laundering Law.
 Frequently Asked Questions

• Are deposits maintained in branches and subsidiaries of

foreign banks operating in the Philippines insured by the
PDIC?
• Yes, the PDIC Charter provides that the deposits in
branches and subsidiaries of foreign banks licensed by
the Bangko Sentral ng Pilipinas (BSP) to perform
banking functions in the Philippines are insured by the
PDIC.
 Frequently Asked Questions

• Are deposits maintained in Philippine banks with

branches outside the Philippines insured by the PDIC?
• The PDIC Charter provides that a Philippine bank may
elect to insure with the PDIC its deposits in branches
outside the Philippines. As of 31 December 2012, no
Philippine bank has elected to insure deposits in their
foreign branches with PDIC.
• To verify if your deposits in a branch of a Philippine bank
outside the Philippines are covered by deposit insurance
in the host foreign country, please inquire with the
account officer of your branch.
 Frequently Asked Questions

• What specific risks to a bank does PDIC cover?

• PDIC covers only the risk of a bank closure ordered by
the Monetary Board. Thus, bank losses due to theft, fire,
closure by reason of strike or existence of public
disorder, revolution or civil war, are not covered by PDIC.
 Frequently Asked Questions

• Shall the depositor pay any insurance premium to PDIC?

• No. Insurance premium is paid by the banks, not by the
depositors. The bank is assessed 1/5 of 1% per annum
of the assessment base of the bank.
 Frequently Asked Questions

• How is insurance coverage determined?

• In determining the insured amount, the outstanding
balance of each account is adjusted, such that interests
are updated, withholding taxes are deducted, accounts
maintained by a depositor in the same right and capacity
are added together; and whenever applicable, unpaid
loans and other obligations of the depositor are
deducted; and in no case shall insured deposit exceed
P500,000.
 Frequently Asked Questions

• How is insurance coverage determined?

• R.A. No. 9576 stipulates that PDIC will not pay deposit
insurance for the following accounts or transactions:
• Investment products such as bonds, securities and trust
accounts;
• Deposit accounts which are unfunded, fictitious or
fraudulent;
• Deposit products constituting or emanating from unsafe
and unsound banking practices;
• Deposits that are determined to be proceeds of an
unlawful activity as defined under the Anti-Money
Laundering Law.
 Frequently Asked Questions

• Can PDIC insurance coverage be increased by having

several accounts in the same name in an insured bank?
• No. Deposit insurance coverage is not determined on a
per-account basis. The type of account (whether
checking, savings, time or other form of deposit) has no
bearing on the amount of insurance coverage.
 Frequently Asked Questions

• If I have deposits in several different insured banks, will

my deposits be added together for insurance purposes?
• No. Deposits in different banking institutions are insured
separately. However, if a bank has one or more
branches, the main office and all branch offices are
considered as one bank. Thus, if you have deposits at
the main office and at one or more branch offices of the
same bank, the deposits are added together when
determining deposit insurance coverage, the total of
which shall not exceed P500,000.
 Frequently Asked Questions

• Is there a need for a depositor to file his claim for insured

deposit with PDIC?
• Yes. Depositors will be advised through the national
and/or local media and posters at the premises of the
closed insured bank and other public places within the
locality on the schedule of distribution of claim forms by
PDIC, receiving of claim forms by PDIC, and the
prescriptive date of filing claims by the depositors.
 Frequently Asked Questions

• When should the depositor of a closed insured bank file

his claim with PDIC?
• The depositor of the closed insured bank has 24 months
from date of bank takeover to file his deposit insurance
claim.
 Frequently Asked Questions

• What happens when the depositor of a closed bank fails

to file his claim within the 24-month period?
• All rights of the depositor with respect to the insured
deposit shall no longer be honored. But he may still
make a claim against the assets of the closed bank.
 Frequently Asked Questions

• How long does it take PDIC to settle a claim for insured

deposit?
• PDIC aims to pay valid claims as soon as possible. Prior
to payout, claims are examined thoroughly. This is to
protect the Deposit Insurance Fund (DIF) which is the
source of insurance payments. Sometimes, depositors
mistakenly assume that the payouts are sourced from
their deposits. This is not the case. The payouts are from
PDIC’s own funds.
 Frequently Asked Questions

• How long does it take PDIC to settle a claim for insured

deposit?
• The claim for insured deposit should be settled within six
(6) months from the date of filing provided all
requirements are met but the claim must be filed within
twenty-four (24) months after bank takeover. The six-
month period shall not apply if the documents of the
claimant are incomplete or if the validity of the claim
requires the resolution of issues of facts and law by
another office, body or agency, independently or in
coordination with PDIC.
 Frequently Asked Questions

• What processes are involved before PDIC starts

servicing claims?
• Deposit records are subjected to an examination prior to
the start of servicing/settlement of claims. Claims are
evaluated and processed according to PDIC's standard
procedures.
 Frequently Asked Questions

• How long does the pre-settlement examination take?

• The length of time needed for the pre-settlement
examination of deposit liabilities of a closed insured bank
largely depends on the completeness and accuracy of
records turned over by the Bank to PDIC and the
number of deposit accounts to be examined.
 Frequently Asked Questions

• If the deposit account in a closed bank is more than

P500,000.00, what happens to the excess of the
maximum amount of insured deposit?
• The claim for the uninsured portion of the deposit is a
claim against the assets of the closed bank.
• The claim may be filed with the Liquidator of the closed
bank within sixty (60) days from publication of notice of
closure. However, payment of said claim will depend on
the bank’s available assets and approval of the
Liquidation Court. The schedule of payment beyond the
P500,000.00 maximum insurance shall be based on
priorities set by law.