Salient Features of Philippine Deposit

Insurance Corporation (PDIC) – Republic Act 3591

1. Introduction

PDIC is a government instrumentality created in 1963 by Republic Act 3591, as

amended, to insure the deposits of all banks. PDIC exists to protect depositors
by providing deposit insurance coverage for the depositing public and help
promote financial stability.

PDIC is tasked to strengthen the mandatory deposit insurance coverage system

to generate, preserve, maintain faith and confidence in the country's banking
system; and protect it from illegal schemes and machinations.

2. Philippine Deposit Insurance System at a Glance

The Philippine Deposit Insurance Corporation (PDIC) is a government

instrumentality created on 22 June 1963 by Republic Act 3591 entitled, An Act
Establishing the Philippine Deposit Insurance Corporation (PDIC), Defining Its
Powers and Duties and for Other Purposes.

3. Public Policy Objectives

PDIC was established to promote and safeguard the interests of the

depositing public by way of providing insurance coverage on all insured
deposits. 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.

4. Mandates

Consistent with its public policy objectives, the PDIC has the following mandates:

I. Deposit Insurance. PDIC provides a maximum deposit insurance

coverage of PhP500,000 per depositor per bank. To pay claims on insured
deposits, PDIC builds up the Deposit Insurance Fund (DIF) primarily
through assessments of banks at an annual flat rate of 1/5 of 1% of their
total deposit liabilities.
II. Receivership of Closed Banks. PDIC proceeds with the liquidation
process upon order of the Monetary Board of the Bangko Sentral ng
Pilipinas (BSP). The assets of the closed bank are managed and eventually
disposed of to settle claims of creditors in accordance with the preference
and concurrence of credits as provided by the Civil Code of the Philippines.

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5. Membership

Membership with PDIC is mandatory for all banks licensed by the BSP to operate
in the Philippines:

• Banks incorporated under Philippine laws, such as commercial banks,

savings banks, mortgage banks, stock savings and loan associations,
development banks, cooperative banks, and rural banks
• Domestic branches of foreign banks

As of 31 December 2020, there are 535 banks in the Philippine banking system.
These consist of 46 commercial banks (including branches of foreign banks), 48
thrift banks (savings banks, mortgage banks, stock savings and loan
associations, and development banks), and 441 rural banks (including
cooperative banks).

6. Scope of Deposit Insurance Protection

PDIC provides a maximum deposit insurance coverage of PhP500,000 per

depositor per bank. It covers all types of bank deposits in banks whether
denominated in local or foreign currencies. All deposit accounts of a depositor in
a closed bank maintained in the same right and capacity shall be added together.
A joint account shall be insured separately from any individually-owned deposit
account.

As of 31 December 2020, around 80.1 million accounts in 535 banks are covered
by deposit insurance. Of the total number of accounts, 96.7% are with balances
not exceeding the maximum deposit insurance coverage of PhP500,000 per
depositor per bank. For the same period, total deposits in the Philippine banking
system amounted to PhP14.87 trillion, of which 20.6% is covered by deposit
insurance.

7. Frequently Asked Questions

What is the Philippine Deposit Insurance Corporation (PDIC)?

PDIC exists to protect depositors by providing deposit insurance coverage for the
depositing public and help promote financial stability.

PDIC is a government instrumentality created in 1963 by virtue of Republic Act

3591 to provide depositor protection and promote financial stability. It is an
attached agency of the Department of Finance.

The PDIC’s core mandates are deposit insurance and liquidation of closed banks.

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The PDIC prides itself as a professional, committed and responsive public service
institution and a champion in governance. It is a socially responsible corporation
which advocates to empower every Filipino through financial literacy.

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.

What are the functions of PDIC?

Deposit Insurer
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:

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.

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Are all Banks members of PDIC?

Membership of banks to PDIC is mandatory; hence, all operating banks are

members of PDIC.

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:

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.

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.

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:

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 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 deposit insurance coverage, the total of which shall not exceed
P500,000.

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.

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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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 claims. Claims are evaluated and processed according to
PDIC's standard procedures.

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.

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.

Source: https://www.pdic.gov.ph/

ALL COPYRIGHTS RESERVED

Atty. Yaslani B. Bantuas, CPA

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