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 9576 signed into law on April 29, 2009. RA 9576 increased the maximum deposit insurance coverage to P500,000.00. The new law also includes important provisions to ensure that the PDIC remains financially and institutionally strong to fulfill its mandate under its Charter. The PDIC now has the authority to determine which deposit products are covered by insurance. The PDIC is also authorized to conduct independent special examination of banks and may inquire into or examine deposit accounts of ailing banks in the event there is a finding of unsafe and unsound banking practices. Part of the financial strengthening measures for the PDIC, on the other hand, include exemption from taxes and the authority to issue sovereign bonds, debentures and other debt issuances. The PDIC is an attached Department of Finance.
agency
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What is PDIC’s overall mandate? PDIC exists to provide permanent and continuing 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.
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.
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. R.A. No. 9576 stipulates that PDIC will not pay deposit insurance for the following accounts or transactions: 1. Investment products such as bonds, securities and trust accounts; 2. Deposit accounts which are unfunded, fictitious or fraudulent; 3. Deposit products constituting or emanating from unsafe and unsound banking practices; 4. Deposits that are determined to be proceeds of an unlawful activity as defined under the Anti-Money Laundering Law. Are all banks members of PDIC? Membership of banks to PDIC is mandatory; hence, all operating banks are members of PDIC.
What are the functions of PDIC? Deposit Insurer Co-regulator of Banks Receiver and Liquidator of Closed Banks
What is PDIC’s maximum deposit insurance coverage?
Effective June 1, 2009, the maximum deposit insurance coverage is P500,000 per depositor. All
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,
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any insured bank with branch outside the Philippines may elect to include for insurance its deposit obligations payable at such branch. 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. Exclusions from deposit insurance coverage as stipulated in R.A. No. 9576: 1. Investment products such as bonds, securities and trust accounts; 2. Deposit accounts which are unfunded, fictitious or fraudulent; 3. Deposit products constituting or emanating from unsafe and unsound banking practices; 4. Deposits that are determined to be proceeds of an unlawful activity as defined under the Anti-Money Laundering Law. 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. 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.
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.
Shall the depositor premium to PDIC?
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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.
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. R.A. No. 9576 stipulates that PDIC will not pay deposit insurance for the following accounts or transactions: 1. Investment products such as bonds, securities and trust accounts; 2. Deposit accounts which are unfunded, fictitious or fraudulent; 3. Deposit products constituting or emanating from unsafe and unsound banking practices; 4. Deposits that are determined to be proceeds of an unlawful activity as defined under the Anti-Money Laundering Law. 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.
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
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deposit insurance coverage, the total of which shall not exceed P500,000.
claims. Claims are evaluated and processed according to PDIC's standard procedures.
Is there a need for a depositor to file his claim for insured deposit with PDIC?
How long does examination take?
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.
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.
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.
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.
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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?
If the closed bank is not rehabilitated or taken over by another bank, amount in excess of the P500,000 coverage can still be claimed upon the final liquidation of the remaining assets of the closed bank. The claim may be filed with the Liquidator of the closed bank but payment of the said claim will depend on the bank's available assets to settle its preferred claims (Government taxes, labor claims, secured credits and trust funds) 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.
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. 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. What processes are involved before PDIC starts servicing claims? Deposit records are subjected to an examination prior to the start of servicing/settlement of
Philippine Deposit Insurance System at a Glance The Philippine Deposit Insurance Corporation (PDIC) is a government instrumentality created on June 22, 1963 by Republic Act 3591 entitled, An Act Establishing the Philippine Deposit Insurance Corporation (PDIC), Defining Its Powers and Duties and for Other Purposes (the "PDIC Charter"). PDIC was created to "promote and safeguard the interests of the depositing public by way of providing permanent and continuing insurance coverage on all insured deposits." The PDIC also aims to strengthen the mandatory deposit insurance coverage system to generate, preserve, and maintain faith and confidence in the country's banking system, and protect it from illegal schemes and machinations. Mandate Consistent with its public policy objectives, the PDIC has the following mandates: i.
As State Deposit Insurer. The Corporation provides deposit insurance of up to Php500,000, the maximum deposit insurance coverage. Member-banks are assessed annually at a flat rate of 1/5 of
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ii.
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1% of their total deposit liabilities. The assessments are collected from memberbanks semi-annually and form part of PDIC's Deposit Insurance Fund (DIF). As Co-Regulator of banks. PDIC works closely with the Bangko Sentral ng Pilipinas (BSP) in strengthening the banking system. PDIC is authorized to issue regulations to implement its Charter, conduct bank examinations and investigations to determine banks' financial health and their adherence to rules and regulations on banking and deposit insurance, and extend financial assistance to distressed banks. As Statutory Receiver. PDIC is the statutory receiver and liquidator of all closed banks. Upon order of the Monetary Board of the BSP, PDIC takes over closed banks, administers their assets, records and affairs; and preserves and disposes these assets for the benefit of the closed banks' creditors. If the Monetary Board orders the liquidation of a bank that has been placed under receivership, creditors' claims against the bank are settled according to the preference and
PDIC insures valid deposits in domestic offices of its member-banks, as follows: •
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By Deposit Type:
Savings
Special Savings
Demand/Checking
Certificate of Time Deposits
By Deposit Account:
Single Account
Joint Account
Account "By", "In Trust For" (ITF) or
"For the Account of" (FAO) another person
By Currency:
Philippine peso
Foreign currencies considered as part of international reserves at the Bangko Sentral ng Pilipinas
*Under PDIC Regulatory Issuance No. 2011-01, the PDIC shall deem a deposit-related practice, activity, transaction, or omission to be an unsafe and/or unsound banking practice when it has resulted or may result in:
concurrence of credits as provided by the Civil Code of the Philippines. Membership Membership with PDIC is mandatory for all banks licensed by the BSP to operate as such in the Philippines. •
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Banks incorporated under Philippine laws, such as commercial banks, development banks, savings and loan associations, and rural or cooperative banks Domestic branches of foreign banks
Scope of Deposit Insurance Protection As a rule, PDIC provides deposit insurance of up to Php500,000 per depositor per bank. It covers all types of bank deposits in member-banks denominated in both local and foreign currencies. As of December 31, 2011, total deposits in the banking system amounted to Php5.4 trillion consisting of 43.7 million deposit accounts. 97.2% of the deposit accounts are fully covered by deposit insurance.
The following bank products are not covered by deposit insurance: i.
Certain bank products such as trust and investment products, bonds and securities, and similar instruments
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Deposit accounts or transactions that: a.
Are unfunded, or fictitious or fraudulent
b.
Emanated from or constituting unsafe and unsound banking practice/s* as determined by the PDIC in consultation with the BSP, after due notice and hearing and publication of PDIC's directive to cease and desist against such deposit accounts/transactions
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Are determined to be proceeds of unlawful activity as defined in the Anti-Money Laundering Act (Republic Act 9160, as amended)
1. Unreasonable delay in the processing or determination of the validity of deposit claims in the event of bank closure; or 2. Material loss or damage or abnormal risk to the bank's depositors, creditors, shareholders, or to the PDIC; or
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3. Material loss or damage or abnormal risk or danger to the safety, stability, liquidity, or solvency of the bank. The following activities may be considered unsafe and/or unsound deposit-related practices: 1. Deposit-related practice/activity/transaction without the approval or adequate controls required under existing laws, rules and regulations; 2. Failure to keep bank records within bank premises; 3. Grant of high interest rates, when bank has: a) negative unimpaired capital or b) liquid assets to deposit ratio of less than 10% or an operating loss; 4. Non-compliance with PDIC regulations; or 5. Other deposit related practices, activities, and transactions that may be identified through appropriate issuances.
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