Philippine Deposit Insurance Corporation (PDIC) Faqs you should know to protect your monetary interest in banks.
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 agency of the Department of Finance.
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.
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 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:
- 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.
Are all banks members of PDIC?
Membership of banks to PDIC is mandatory; hence, all operating banks are members of PDIC.
What are deposits?
- unpaid balance of money or its 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, savings, time or thrift account, or issued in accordance with Bangko Sentral rules and regulations and other applicable laws, together with such other obligations of a bank, which, consistent with banking usage and practices, the Board of Directors shall determine and prescribe by regulations to be deposit liabilities of the bank: Provided, That any obligation of a bank which is payable at the office of the bank located outside of the Philippines shall NOT be a deposit for any of the purposes of this Act or included as part of the total deposits or of insured deposit: Provided, further, That, subject to the approval of the Board of Directors, any insured bank which is incorporated under the laws of the Philippines which maintains a branch outside the Philippines may elect to include for insurance its deposit obligations payable only at such branch.
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.
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:
- 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.
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.
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 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.