PHILIPPINE DEPOSIT INSURANCE CORPORATION ACT

Question 1

Basic Policy

Answer 1

• The Philippine Deposit Insurance Corporation (“PDIC”) shall, as a basic policy, promote and safeguard the interests of the depositing public by providing insurance coverage on all insured deposits and helping maintain a sound and stable banking system. [Sec. 1, PDIC Charter, as amended by R.A. No. 10846]

Question 2

Concept of insured deposits

Answer 2

The term “insured deposit” means the amount due to any bona fide depositor for legitimate deposits in an insured bank as of the date of closure but not to exceed P500,000.00.

Question 3

Adjusting the Maximum Deposit Insurance Cover

Answer 3

The maximum deposit insurance coverage is Five hundred thousand pesos (P500,000.00).
* However, in case of a condition that threatens the monetary and financial stability of the banking system that may have systemic consequences, as defined in Section 22 of the PDIC Charter, as determined by the Monetary Board, the maximum deposit insurance cover may be adjusted –
* In such amount,
* For such a period, and/or * For such deposit products,
* As may be determined by a unanimous vote of the Board of Directors in a meeting called for the purpose, chaired by the Secretary of Finance
* Subject to the approval of the President of the Philippines.[Sec.5(j)]

Question 4

Liability to depositors
Deposit liabilities required to be insured with the PDIC

Answer 4

General Rule: The deposit liabilities of any bank shall be insured with PDIC. [Sec. 6, PDIC Charter, as amended by R.A. 10846] (Note: Foreign currency deposits are also insured by PDIC pursuant to R.A. 6426 )
* Exception: Deposits in overseas branches of local banks are not insured with PDIC, as PDIC insurance only covers deposits in banks located in the Philippines.

Question 5

Commencement of liability

Answer 5

PDIC shall commence the determination of insured deposits due the depositors of a closed bank upon its actual takeover of the closed bank.
* PDIC shall give notice to the depositors of the closed bank of the insured deposits due them by whatever means deemed appropriate by the Board of Directors: Provided, That –
* PDIC shall publish the notice once a week for at least three (3) consecutive weeks in a newspaper of general circulation; or
* When appropriate, it shall be published in a newspaper circulated in the community or communities where the closed bank or its branches are located.

Question 6

Deposit accounts not entitled to payment

Answer 6

• PDIC shall not pay deposit insurance for the following accounts or transactions:
• Investment products such as bonds and securities, trust accounts, and other similar instruments;
• Deposit accounts or transactions which are fictitious or fraudulent, as determined by PDIC;
• Deposit accounts or transactions constituting, and/or emanating from, unsafe and unsound banking practice/s
• As determined by PDIC, in consultation with the BSP;
• After due notice and hearing, and publication of a cease and desist order issued by
  PDIC against such deposit accounts or transactions; and
• Deposits that are determined to be the proceeds of an unlawful activity as defined under the Anti-Money Laundering Act

Question 7

Extent of liability

Answer 7

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.

Question 8

Determination of insured deposits

Answer 8

• The amount of the insured deposit shall be determined according to such regulations as the Board of Directors may prescribe.
• In determining such amount due to any depositor, there shall be added together all deposits in the bank maintained in the same right
  and capacity for his or her benefit either in his or her own name or in the name of others. [Sec. 5(j)]

Question 9

Calculation of liability

Answer 9

Per depositor, per capacity rule

Question 10

Joint accounts

Answer 10

If the account is held jointly by two or more natural persons, orby two or more juridical persons or entities

GR: The maximum insured deposit shall be divided into as many equal shares as there are individuals, juridical persons or entities.
EX: Unless a different sharing is stipulated in the document of deposit

If the account is held by a juridical person or entity jointly with one or more natural persons

The maximum insured deposit shall be presumed to belong entirely to such juridical person or entity

Question 11

Mode of payment

Answer 11

payment of the insured deposits on such closed bank shall be made by PDIC as soon as possible either:
* (a) by cash; or
* (b) by making available to each depositor a transferred deposit in another insured bank in an amount equal to insured deposit of such depositor.

• Provided, however, That PDIC, in its discretion, may:
  1. Require proof of claims to be filed before paying the
  insured deposits; and
  1. Require final determination of a court of competent jurisdiction before paying such claim, in any case where PDIC is not satisfied as to the viability of a claim for an Insured deposit.

Question 12

Effect of payment of insured deposits

Answer 12

• PDIC, upon payment of any depositor, shall be subrogated to all rights of the depositor against the closed bank to the extent of such payment. Such subrogation shall include the right on the part of PDIC to receive the same dividends and payments from the –
• 1. Proceeds of the assets of such closed bank; and
• 2. Recoveries on account of stockholders’ liability, as would have been
     payable to the depositor on a claim for the insured deposits.
• Note: However, such depositor shall retain his claim for any uninsured portion of his deposit.

Question 13

Failure of depositor to claim insured deposits

Answer 13

• If the depositor in the closed bank shall fail to claim his insured deposits with PDIC within two (2) years from actual takeover of the closed bank by the receiver, or does not enforce his claim filed with the corporation within two (2) years after the two-year period to file a claim:
• (a) All rights of the depositor against PDIC with respect to the insured deposit shall be barred;
• (b) However, all rights of the depositor against the closed bank and its shareholders or the receivership estate to which PDIC may have become subrogated, shall thereupon revert to the depositor.
• (C)Thereafter, PDIC shall be discharged from any liability on the insured deposit. [Sec. 18, R.A. 9302]
  Note: PDIC may waive the abovementioned two-year period.

Question 14

Prohibition against splitting of deposits

Answer 14

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;
* Either:
* - Within one hundred twenty (120) days immediately preceding a bank holiday; or
* - During a bank-declared bank holiday, or
* - Within one hundred twenty (120) days immediately preceding a closure order issued by the Monetary Board of the BSP for the purpose of availing of the maximum deposit insurance coverage.

Question 15

Penalty for Splitting of Deposits

Answer 15

• The splitting of deposits or creation of fictitious or fraudulent loans or deposit accounts shall, at the discretion of the court, be punished by imposing upon any director, officer, employee or agent of a bank:
• The penalty of imprisonment of not less than six (6) years but not more than twelve (12) years; or
• A fine of not less than Fifty thousand pesos (P50,000.00) but not more than Two million pesos (P2,000,000.00); or
• Both imprisonment and the fine. [Sec. 26(f)(1)(e), PDIC Charter, as amended by R.A. 10846]