BANKING

PART IV

PHILIPPINE DEPOSIT INSURANCE CORPORATION

RA 3591 as amended by RA 10846 (App. May 23, 2016)
 GUIDE QUESTIONS
1. What deposit accounts are not insured by the PDIC?

2. When BSP has determined that a bank is capital deficient, what may the PDIC
do?

3. What is the liability of any PDIC personnel if there is failure or delay in the
settlement of claims for deposit insurance?

4. What are the modes of resolution of a bank?

5. In the Gidwani case, what were the circumstances supporting the finding that
the deposits were actually or beneficially owned by the Gidwani spouses?
 BASIC POLICY
• PDIC was created by RA 3591 on June 22, 1963 as an insurer of deposits in all
banks entitled to the benefits of insurance.
• It is a government instrumentality that operates under the DOF.
• Its primary purpose is to act as
• Deposit insurer
• Co-regulator of banks
• Receiver and liquidator of closed banks.
• PDIC promotes and safeguards the interests of the depositing public by way of
providing permanent and continuing insurance coverage of all insured deposits.
• PDIC helps in developing a sound and stable banking system at all times.

PDIC V PHILIPPINE COUNTRYSIDE RURAL BANK ET AL GR 176438 JAN

24, 2011
 BASIC POLICY

“SEC. 2. — It is hereby declared to be the policy of the State 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.
Towards this end, the government must extend all means and mechanisms
necessary for the Corporation to effectively fulfill its vital task of promoting and
safeguarding the interests of the depositing public by way of providing
insurance coverage on bank deposits and in helping develop a sound and stable
banking system.
In view of the crucial role and the nature of its functions and responsibilities, the
Corporation, while being a government instrumentality with corporate powers,
shall enjoy fiscal and administrative autonomy.”
 POWERS AND RESPONSIBILITIES AND PROHIBITIONS

Sec. 10 The BOD of the PDIC shall have the ff powers:

(a) Administer the affairs of PDIC fairly and impartially without discrimination;

(b) Appoint examiners to examine any insured bank to ascertain the facts relative to its condition and make a full and
detailed report to PDIC; appoint claim agents to investigate and examine all claims for insured deposits and transferred
deposits; and, appoint investigators to conduct investigations on frauds, irregularities and anomalies committed by
banks based on reports of examination by PDIC and BSP or complaints from depositors or other government agency;

(c) Require each insured bank to report to PDIC its condition in such form and times as BOD decides; failure to comply
may subject bank to penalty of not more than P10,000 for each day of failure;

(d) Access reports of examinations made by and reports of conditions to, the BSP or its appropriate supervising
departments, and BSP shall also have access to similar PDIC reports; notwithstanding laws to the contrary, PDIC may
access such reports and any information derived from any special or general examination or inquiry conducted by BSP
in respect to bank fraud or serious irregularity in an insured bank; provided, PDIC may use such reports and findings
under similar terms and conditions under laws applicable to the BSP; require the bank to keep and maintain a true and
accurate record or statement of its daily deposit transactions consistent with BSP and PDIC standards (noncompliance
will be dealt in accordance with Sec 26(f).
 POWERS OF EXAMINATION AND INVESTIGATON
MORE ON SEC 10 (b) and (b-1)

• Distinction between the power to examine and to investigate

• Power to examine means to make a thorough examination of all the affairs of the bank and
in doing so the examiner has the power to administer oaths, take and preserve testimony ,
compel production of documents and make a full and detained report to the PDIC.

• Power to investigate means to conduct investigations on frauds, irregularities and

anomalies committed in banks, based on reports of examinations conducted by PDIC and
BSP or complaints from depositors or other government agencies.

PDIC V PHILIPPINE COUNTRYSIDE RURAL BANK ET AL GR 176438 JAN 24,

2011
 POWERS AND RESPONSIBILITIES AND PROHIBITIONS

Sec. 10 (con’t)

(e) PDIC personnel are prohibited from:

(1) being an officer, director, consultant, employee or stockholder, directly or
indirectly, of any bank or banking institution except as otherwise provided in this
Act;
(2) receiving any gift or thing of value from any officer, director or employee
thereof
(3) revealing in any manner except as provided in this Act or under order of the
court, information relating to the condition or business of any such institution. This
prohibition shall not apply to giving of information to the BOD, President of
PDIC, Congress, any agency of government authorized by law, or to any person
authorized by either of them in writing to receive such information.
 “RECEIVING ANY GIFT OR THING OF VALUE”

Facts: PDIC took over as receiver the affairs of BDBI after the BSP MB ordered its
closure. As such, PDIC through its officers and employees went to gather, preserve,
administer assets and liabilities of the bank. According to the complaint affidavit, BDBI
officer Cu instructed a bank employee to take money from the vault (P30,000) and to
deposit the same to PDIC officer Apela’s bank account in the PNB. Cu claimed it was
professional fee to Apela. Apela thereafter covered some “cash items” by regularizing
and removing them from BDBI’s books. It was also alleged that Cu had received
“advance warning” when PDIC people were coming to the bank and would thus place
cash in the vault of the bank but return it after the examination to its source.
Ruling: SC said Ombudsman gravely erred in dismissing the cases against respondents
there being probable cause to indict them for direct bribery and violation of RA 3015 (e).

PDIC V HON ORLANDO CASIMIRO, DEPUTY OMBUDSMAN, FIDEL C. CU, APELO, ET AL GR 2066866, SEP 2,
2015
 POWERS AND RESPONSIBILITIES AND PROHIBITIONS

Sec 10 (con’t)
(f) Underwrite or advance all legal costs and expenses, legal fees and other expenses of external counsel, or provide
legal assistance to, directors, officers, employees or agents of PDIC in connection with any civil, criminal,
administrative or any other action or proceeding, to which such director officer employee or agent is made a party
by reason of or in connection with exercise of authority or performance of functions and duties except in cases
which PDIC instituted against such director officer employee or agent; but extends where he is no longer with PDIC
subject to good faith, lack of negligence or misconduct on his part;
(g) Advance such costs and expenses even before final disposition of case upon receipt of undertaking by such
director officer employee or agent to repay where MB of the BSP were to appoint PDIC as receiver subject to prior
notice by MB of such appointment;
(h) PDIC, its directors, officers, employees or agents shall be held free and harmless from any liability unless found
to be in willful violation, performed in bad faith, with malice or gross negligence, and shall be indemnified for any
and all liabilities, losses, claims, demands, damages, deficiencies, costs and expenses of whatsoever kind and nature
in connection with the performance of their functions, without prejudice to any criminal liability under existing
laws;
(g) Members of the Board and personnel of PDIC may become directors and officers of any bank and banking
institution and of any entity related to such institution in connection with financial assistance extended by PDIC
when in the opinion of the Board it is appropriate to protect PDIC interests.
 POWERS AND RESPONSIBILITIES AND PROHIBITIONS

Sec 10 (con’t)
• Borrowing from any bank or banking institution by examiners and other
personnel of PDIC examination departments shall be prohibited only with
respect to the particular institution in which they are assigned, or are conducting
an examination.
• Personnel of other PDIC departments are likewise prohibited from borrowing
during the period of time that a transaction of such institution with PDIC is
being evaluated, processed or acted upon by such personnel.
• Provided however, that the Board may in its discretion indicate the position
levels or functional groups to which the prohibition is applicable.
• Borrowing by all full-time personnel of the PDIC from any bank or banking
institution shall be secured and disclosed to the Board, and shall be subject to
such further rules and regulations as the Board may prescribe.
 CONCEPT OF INSURED DEPOSITS
Sec. 5 (j) definition of “insured deposits”
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 Five Hundred Pesos (PHP500,000). Such amount shall be determined
according to such regulations as the PDIC Board 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. A joint
account regardless of whether the conjunction “and” , “or” , “and/or” is used, shall be insured
separately from any individually-owned deposit account: Provided, That

(1) If the account is held jointly by two or more natural persons, or by two or more juridical persons
or entities, the maximum insured deposit shall be divided into as many equal shares as there are
individuals, juridical persons or entities, unless a different sharing is stipulated in the document
of deposit; and

(2) 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;
 CONCEPT OF INSURED DEPOSITS
Sec 5 (j) definition of “insured deposits”
Provided, further, that the aggregate of the interest of each co-owner over several joint accounts,
whether owned by the same or different combinations of individual, juridical persons or entities, shall
likewise be subject to the maximum insured deposit of P500,000;

Provided, furthermore, that the provisions of any law to the contrary notwithstanding, no
owner/holder of any passbook, certificate of deposit, or other evidence of deposit shall be recognized
as a depositor entitled to the rights provided in this Act unless the passbook, certificate of deposit, or
other evidence of deposit is determined by PDIC to be an authentic document or record of the issuing
bank;

Provided, finally, that in case of a condition that threaten the monetary and financial stability of the
banking system that may have systemic consequences as defined in Sec 22, as determined by the MB,
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 and chaired by the Secretary of Finance subject to the approval of the
President of the Philippines.
 CONCEPT OF INSURED DEPOSITS
PDIC V HON CA, JOSE ABAD, LEONOR ABAD, ET AL, GR 126911, APR 30, 2003

The issue was whether the Golden Time Deposits (GTDs) were insured deposits or mere derivatives of respondents’
previous account balances already pre-terminated/terminated because the bank (MBC) was already in serious financial
distress.
Under its charter, PDIC is liable only for deposits received by a bank “in the usual course of business.” Being of the
firm conviction that, as the reported May 25, 1987 bank transactions were so massive, hence, irregular, PDIC
essentially sought a judicial declaration that such transactions were not made “in the usual course of business” and,
therefore, it cannot be made liable for the deposits subject thereof.

The SC ruled that no actual money in bills and/or coins was handed by respondents to MBC does not mean that the
transactions on the new GTDs did not involve money and that there was no consideration therefor. For the outstanding
balance of respondents’ 71 GTDs in MBC prior to May 26, 1987 in the amount of P1,115,889.15 as earlier mentioned
was re-deposited by respondents under 28 new GTDs. Admittedly, MBC had P2,841,711.90 cash on hand – more than
double the outstanding balance of respondent’s 71 GTDs – at the start of the banking day on May 25, 1987. Since
respondent Jose Abad was at MBC soon after it opened at 9:00 a.m. of that day, PDIC should not presume that MBC
had no cash to cover the new GTDs of respondents and conclude that there was no consideration for said GTDs.

PDIC having failed to overcome the presumption that the ordinary course of business was followed, the SC found that
the 28 new GTDs were deposited “in the usual course of business” of MBC.
 LIABILITY TO DEPOSITORS

• DEPOSIT LIABILITIES REQUIRED TO BE INSURED

• COMMENCEMENT OF LIABILITY
• DEPOSIT ACCOUNTS NOT ENTITLED TO PAYMENT
• EXTENT OF LIABILITY
• DETERMINATION OF INSURED DEPOSITS
 DEPOSIT LIABILITIES REQUIRED TO BE INSURED
Sec 6.
The deposit liabilities of any bank which is engaged in the business of receiving
deposits as herein defined on the effective date of this Act, or which thereafter
may engage in the business of receiving deposits shall be insured with PDIC.
Whenever a bank is determined by the BSP to be capital deficient, PDIC may
conduct an insurance risk evaluation on the bank to enable it to assess the risk to
the Deposit Insurance Fund. Such evaluation may include the determination of:
(i) the fair market value of the assets and liabilities of a bank;
(ii) the risk classification of a bank; or
(iii) possible resolution modes under Sec 11 subject to such terms and conditions
as the PDIC Board may prescribe.
 COMMENCEMENT OF LIABILITY

Sec 18.
Whenever an insured bank shall have been closed by the Monetary Board pursuant ot Sec 30 of RA
7653, or upon expiration or revocation of a bank’s corporate term, payment of the insured deposits on
such closed bank shall be made by PDIC as soon as possible either
(1) By cash
(2) 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 require proof of claims to be filed before paying
the insured deposits, and that in any case where PDIC is not satisfied as to the validity of a claim for
an insured deposit, it may require final determination of a court of competent jurisdiction before
paying such claim;
Provided, further, that failure to settle the claim within 6 months from the date of filing of claim for
insured deposit where such failure was due to grave abuse of discretion, gross negligence, bad faith, or
malice, shall, upon conviction, subject the directors, officers or employees of PDIC responsible for the
delay to imprisonment from 6 months to one year
Provided further, that the period shall not apply if the validity of the claim requires the resolution of
issues of facts and or law by another office, body or agency including the case mentioned in the first
provision or by PDIC together with such other office, body or agency.
 DEPOSIT ACCOUNTS NOT ENTITLED TO PAYMENT

PDIC shall not pay deposit insurance for the following accounts or transactions:
(1) Investment products such as bonds and securities, trust accounts, and other
similar instruments;
(2) Deposit accounts or transactions which are fictitious or fraudulent as
determined by PDIC;
(3) Deposit accounts or transactions constituting, and or emanating from, unsafe
and unsound banking practices, as determined by PDIC, in consultation with
BSP, after due notice and hearing, and publication of a directive to cease and
desist issued by PDIC against such deposit accounts, transactions or
practices; and
(4) Deposits that are determined to be the proceeds of an unlawful activity as
defined under RA 9180 as amended
 EXTENT OF LIABILITY

Sec 20.
PDIC upon payment of any depositor as provided for in Sec 19 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 proceeds of the
assets of such closed bank and recoveries on account of stockholders
liability as would have been payable to the depositor on a claim for the
insured deposits; provided that such depositor shall retain his or her claim
for any uninsured portion of his or her deposit which legal preference shall
be the same as that of the subrogated claim of PDIC for its payment of
insured deposits. All payments by PDIC of insured deposits in closed banks
partake of the nature of public funds, and as such, must be considered a
preferred credit in the order of preference under Art 2244 (9) of the NCC.
 DETERMINATION OF INSURED DEPOSITS

Sec. 21
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 3 consecutive weeks in a
newspaper of general circulation or, when appropriate, in a
newspaper circulated in the community or communities where the
closed bank or its branches are located.
 LIABILITY TO DEPOSITORS

• CALCULATION OF LIABILITY
• PER DEPOSITOR, PER CAPACITY RULE
• JOINT ACCOUNTS
• MODE OF PAYMENT
• EFFECT OF PAYMENT OF INSURED DEPOSITS
• PAYMENT OF INSURED DEPOSITS AS PREFERRED CREDIT
• FAILURE TO SETTLE CLAIM OF INSURED DEPOSITOR
• FAILURE OF DEPOSITOR TO CLAIM INSURED DEPOSITS
• EXAMINATION OF BANKS AND DEPOSIT ACCOUNTS
• PROHIBITION AGAINST SPLITTING OF DEPOSITS
• PROHIBITION AGAINST ISSUANCES OF TROS
 LIABILITY OF PDIC
Liability of PDIC for insured deposits is statutory. Under its Charter OR RA
3591, such liability rests upon the existence of deposits with the insured bank.
For a claim for deposit insurance to prosper a corresponding deposit must be
placed in an insured bank. A deposit is constituted only when money or the
equivalent of money is received by a bank.

In the case of PDIC v CA GR 118917 Dec 22, 1997, the certificates of time
deposit (CTD) were issued without the bank having received any money
therefor. There was thus no deposit made nor created which means no
insurance coverage under RA3591

To sum it up, the PDIC is liable for payment of insured deposits to the extent
of deposits received by a bank in the usual course of business.
 JOINT ACCOUNTS

• Joint account, whether the conjunction “and” “or” or “and/or” is used shall be
insured separately from any individually owned deposit account. In
determining proportionate sharing in the maximum insured deposits for a
joint account, the following rules shall govern:
• If account is held jointly by 2 or more persons, all natural persons or all juridical
persons, the maximum insured deposit shall be divided into as many equal shares as
there are persons unless a different sharing is stipulated in the document of deposit;
• If the accounts is owned by a juridical person with one or more natural persons, the
maximum insured deposit is presumed to belong entirely to the juridical person;
• The aggregate interest or total share of each co-owner over several joint accounts,
whether owned by same or different combinations of persons (juridical and natural)
shall be subject to the maximum insured deposit.
• Other rules govern where joint account has one co-depositor who has an
obligation to the closed bank.
 EFFECT OF PAYMENT
• The PDIC shall pay insured claims whenever the MB forbids an
insured bank from doing business. Payment of claims shall be made in
an amount equal to the insured deposit subject to the maximum
deposit insurance coverage. Payments may be made in cash, or by
making available to each deposit a transferred deposit or such deposit
that is assumed by another insured bank.
• Direct payment by the PDIC of an insured deposit discharges the
PDIC from liability on such insured deposit. Payment of a transferred
deposit by a new bank or by an insured bank also discharges the PDIC
and such new bank or other insured bank from liability. Such
payments shall release the PDIC from liability in the same manner that
payment by a closed bank to the depositor discharges said bank from
liability on the insured deposit.
 PROHIBITION AGAINST SPLITTING OF DEPOSITS
• Deposit splitting occurs when all the following elements are present
• The source account in a bank has a balance of more than the maximum deposit
insurance coverage;
• The source account is broken down into, and transferred to, two or more
existing or new accounts in the names of other persons or entities
(transferees);
• The transferees have no beneficial ownership over the transferred funds; and
• The transfer occurred within 120 days immediately preceding or during a bank
declared bank holiday or immediately preceding bank closure.
• The approval by a bank officer or employee of a transaction resulting
in deposit splitting is considered prima facie evidence that such
official or employee participated in deposit splitting activities which
are punishable under Sec 21.
 PROHIBITION AGAINST DEPOSIT SPLITTING
Linsangan filed a claim for payment of deposit insurance with the PDIC. The PDIC denied on the ground
that he was not the beneficial owner of said account; rather, it was his transferees who were held to be
the beneficial owners thereof. Linsangan argued that the transfer of funds to his account is not deposit
splitting because the transfer took place more than 120 days prior to the closure of the bank. Thus, he
claims that the PDIC erred in holding that he was not the beneficial owner of the transferred funds.

The Supreme Court held that in deposit splitting, there is a presumption that the transferees have no
beneficial ownership since the source account, which exceeded the maximum deposit insurance
coverage, was split into two or more accounts within 120 days immediately preceding the bank closure.
Meanwhile, in cases wherein the transfer into two or more accounts occurred before the 120-day period,
the PDIC does not discount the possibility that there may have been a transfer for valid consideration

But in the absence of transfer documents found in the records of the bank at the time of closure, the
presumption arises that the source account remained with the transferor. Even assuming that Cornelio
donated the amount contained in the subject savings account to Carlito, not one document evidencing the
alleged donation is in the custody or possession of the bank upon takeover by PDIC.

Carlito Linsangan vs. PDIC (GR 228807 Feb 11, 2019)

 PROHIBITION AGAINST INJUNCTION AND APPEAL

No court, except the Court of Appeals, shall issue any temporary

restraining order, preliminary injunction or preliminary mandatory
injunction against PDIC or any action under RA 3591. (Sec. 22)

The actions of the PDIC under Sec 4 shall be final and executory and
may not be restrained or set aside by the court, except on appropriate
petition for certiorari on the ground that the action was taken in excess
of jurisdiction or with such grave abuse of discretion as to amount to a
lack or excess of jurisdiction. The petition for certiorari may only be
filed within 30 days from notice of denial of claim for deposit
insurance.
BANK RESOLUTION
 CONCEPT OF BANK RESOLUTION
Sec. 11
(a) PDIC in coordination with BSP may commence the resolution of a bank upon:
(1) Failure of Prompt Corrective Action (PCA) as declared by the MB; or
(2) Request by a bank to be placed under resolution.
PDIC shall inform the bank of its eligibility for entry into resolution.
(b) BSP shall inform PDIC of the initiation of PCA on any bank and shall be
authorized to share with PDIC all information, agreements or documents including any
order of the MB related to PCA. PDIC is authorized to inquire and monitor the status
of the bank under PCA.
(c ) When there is a failure of PCA as declared by MB due to capital deficiency, PDIC
its duly authorized officers or employees may examine, inquire or look into the deposit
records of a bank: Provided that such authority may not be exercised when failure of
PCA is due to grounds other than capital deficiency. Banks, their officers and
employees are mandated to disclose and report to PDIC deposit account information in
said bank.
 CONCEPT OF BANK RESOLUTION
Sec 11. (con’t)
PDIC, its duly authorized officers or employees are prohibited from disclosing
information obtained under this section to any person, government office, bureau or
office. Any act done pursuant to this section shall not be deemed as a violation of RA
1405 or RA 6426 as amended, RA 8791 and other similar laws protecting or safeguarding
the secrecy or confidentiality of bank deposits: provided that any unauthorized disclosure
of information under this section shall be subject to the same penalty under the foregoing
laws protecting the secrecy or confidentiality of bank deposits.
(d) The stockholders, directors, officers or employees of the bank shall have the following
obligations:
(1) Ensure bank compliance with terms and conditions of PDIC for resolution of the bank;
(2) Cause the engagement with consent of PDIC of independent appraiser or auditor to determine
valuation of banks
(3) Ensure prudent management and administration of the bank’s assets, liabilities and records; and
(4) Cooperate with PDIC in the conduct or exercise of its authorities under this Act and honor in
good faith its commitment or undertaking with PDIC on the resolution of the bank.
 CONCEPT OF BANK RESOLUTION

Sec 11 (con’t)
(e ) Within 180 days from a bank’s entry into resolution, PDIC through the
affirmative vote of at least 5 members of the PDIC Board shall determine whether
the bank may be resolved through the purchase of all its assets and assumption of
al its liabilities, or merger or consolidation with, or its acquisition by a qualified
investor.
For this purpose, PDIC may
(1) Determine a resolution package for the bank
(2) Identify and with MB approval, pre-qualify possible acquirers or investors
(3) Authorize pre-qualified acquirers or investors to conduct due diligence on the bank to
determine valuation of the bank through object and thorough review and appraisal of its
assets and liabilities, and assessment of risks or events that may affect its valuation; and
(4) Conduct a bidding to determine the acquirer of the bank.
 CONCEPT OF BANK RESOLUTION
Sc. 11. (con’t)
(f) In determining the appropriate resolution method for a bank, PDIC shall consider the
(1) Fair market value of the assets of the bank, its franchise, as well as the amount of its liabilities
(2) Availability of a qualified investor
(3) Least cost to the DOF
(4) Interest of the depositing public.
(g) PDIC may appoint or hire persons or entities as agents to perform such powers and
functions of PDIC in the resolution of a bank or assist in performance thereof;
(h) The PDIC Board shall prescribe the guidelines or criteria for a bank to be placed under
resolution;
(i) Upon a determination by PDIC that a bank may not be resolved, the MB may act in
accordance with Section 30 of RA 7653 or the New Central Bank Act.
(j) Bank resolution involving purchase of all assets and assumption of all liabilities of a bank
shall be exempt from Act No. 3951 or the Bulk Sales Law.
(k) The provisions of this section are without prejudice to any action that the MB may take
under existing laws.
ROLE OF THE PDIC IN RELATION TO BANKS IN DISTRESS

• CLOSURE AND TAKEOVER

• RECEIVERSHIP

• LIQUIDATION
 CLOSURE AND TAKEOVER

Sec 14

(a) Upon the designation of PDIC as receiver of a closed bank, it

shall serve a notice of closure to the highest ranking officer of the
bank president in the bank premises, or in the absence of such
officer, post the notice of closure in the bank premises or on its main
entrance. The closure of the bank shall be deemed effective upon the
service of the notice of closure. Thereafter, the receiver shall
takeover the bank and exercise the powers of the receiver as
provided in this Act.
 RECEIVERSHIP
Sec 13
(a) The receiver is authorized to adopt and implement without need of consent of the
stockholders, board of directors, creditors or depositors of the closed bank, any or a
combination of the following modes of liquidation:
(1) Conventional liquidation and
(2) Purchase of assets and/or assumption of liabilities
(b) In addition to the powers of a receiver provided under existing laws, PDIC as receiver
of a closed bank is empowered to:
(3) Represent and act for and on behalf of the closed bank;
(4) Gather and take charge of all the assets, records and affairs of the closed bank, and administer the
same for the benefit of its creditors;
(5) Convert the assets of the closed bank to cash or other forms of liquid assets as far as practicable
(6) Bring suits to enforce liabilities of the directors, officers, employees, agents of the closed bank
and other entities related or connected to the closed bank or to collect, recover and preserve all
assets, including assets over which the bank has an equitable interest;
 RECEIVERSHIP
(5) Appoint or hire persons or entities of recognized competence as its deputies, assistants or agents to perform
such powers and functions of PDIC as receiver of the closed bank or assist in the performance thereof
(6) Appoint or hire persons or entities of recognized competence in forensic and fraud investigations;
(7) Pay accrued utilities, rentals and salaries of personnel of the closed bank for a period not exceeding 3
months from available funds of the closed bank
(8) Collect loans and other claims of the closed bank and for this purpose, modify, compromise or restructure
the terms and conditions of such loans or claims as may be deemed advantageous to the interests of the
creditors of the closed bank
(9) Hire or retain private counsel as may be necessary
(10) Borrow or obtain a loan or mortgage, pledge or encumber any asset of the closed bank when necessary to
preserve or prevent dissipation of the assets or to redeem foreclosed assets of the closed bank or to minimize
losses to its depositors and creditors;
(11) If the stipulated interest rate on deposits is unusually high compared with prevailing applicable interest
rates, PDIC as receiver may exercise such powers which may include a reduction o the interest rate at a
reasonable rate: provided that any modifications or reductions shall apply only to earned and unpaid interest.
(12) Utilize available funds of the bank, including funds generated by the receiver from the conversion of
assets to pay for reasonable costs and expenses incurred for the preservation of the assets and liquidation of
the closed bank, without need for approval of the liquidation court.
etc.
 LIQUIDATION

Sec 12
(a) Whenever a bank is ordered closed by the MB, PDIC shall be designated as
receiver and it shall proceed with the takeover and liquidation of the closed bank
in accordance with this Act. For this purpose, banks closed by the Monetary
Board shall no longer be rehabilitated.
Sec 13
(e ) The placement of a bank under liquidation shall have the following effects:
(1) on the corporate franchise or existence – upon placement by the MB of a bank under
liquidation, it shall continue as a body corporate until the termination of the winding up period
under Sec 16. Such continuation as a body corporate shall only be for the purpose of
liquidating, settling and closing its affairs and for the disposal, conveyance or distribution of its
assets pursuant to this Act. The receiver shall represent the closed bank in all cases by or
against the closed bank and prosecute and defend suits by or against it. In no case shall the bank
be reopened and permitted to resume banking business after being placed under liquidation.
 LIQUIDATION

Sec 13 (con’t)
(2) On the powers and functions of its directors, officers and stockholders – their powers, functions and duties terminate
upon closure. They shall be barred from interfering with assets, records and affairs of the bank.
(3) On the assets – all assets of the closed bank shall be deemed in custodia legis in the hands of the receiver; proceeds in
excess of amount secured shall be returned by BSO the receiver.
(4) On labor relations – employer-employee relations deemed terminated upon service of notice of closure. Payment of
separation pay or benefits shall be made from available assets of the bank in accordance with Concurrence and Preference of
Credits.
(5) Contractual Obligations – the receiver may cancel, terminate, rescind or repudiate any contract not necessary for orderly
liquidation, grossly disadvantageous or for any ground provided by law.
(6) On interest payments – liability of the bank to pay interest shall cease upon closure by the MB. Receiver is authorized to
assign as payment to secured creditors the bank assets serving as collaterals in their respective loans up to the extent of
outstanding obligations, including interest as of date of closure of the bank.
Xxx
(9) Actions pending for or against the closed bank – except for actions pending before the SC, actions for or against closed
bank shall upon motion of receiver be suspended for 180 days and referred to mandatory mediation. After mediation, the
case shall be referred back to the court.
(10) Final decisions against the closed bank –shall be stayed. The prevailing party shall file the final decision as a claim with
the liquidation court and settled in accordance with Rules on Concurrence and Preference of Credits.
 TREATMENT OF FOREIGN BANK HEAD OFFICE DEPOSITS
IN PHILIPPINE BRANCHES

PDIC conducted an examination of the books of account and assessed

deficiency premium assessments on Citibank and BA for funds in its interest-
bearing Dollar Time Deposit it had received from its head office and other
foreign branches which were not reported as deposit liabilities. The banks
argued that these amounts were not deposits and did not give rise to
insurable deposit liabilities under the PDIC Charter R.A. No. 3591.
The Supreme Court ruled against PDIC and held that being one and the
same entity, the funds placed by the respondents in their respective branches
in the Philippines should not be treated as deposits made by third parties
subject to deposit insurance under the PDIC Charter.

PDIC vs. Citibank (GR 170290 Apr 11, 2012),

 BENEFICIAL OWNERSHIP OF INSURED DEPOSITS

PDIC filed a criminal complaint before the DOJ Task Force on Financial Fraud (DOJ Task
Force) for estafa through falsification of the RPC and money laundering against the
Spouses Gidwani and the 86 other individuals when it discovered that with the
indispensable cooperation of RCBC, they deceived PDIC into issuing the 683 checks
amounting to P98,733,690. There was only one beneficial owner of 471 bank accounts with
the Legacy Banks of the 86 individual depositors respondent Manu.
The Supreme Court cited Republic Act No. 3591 (The PDIC Charter), as amended, all
deposits in a bank maintained in the same right and capacity for a depositor's benefit,
either in his name or in the name of others, shall be added together for the purpose of
determining the insured deposit amount due to a bona fide depositor, which amount should
not exceed the maximum deposit insurance coverage (MDIC) of P250,000.00.
Thus, the entitlement to a deposit insurance is based not on the number of bank accounts
held, but on the number of beneficial owners. It is this government policy and
P250,000.00
PDIC vs. Manu Gidwani (G.R. No. 234616, Jan 20, 2018),
 PDIC HAS THE DUTY TO GRANT OR DENY CLAIMS
FOR DEPOSIT INSURANCE
The PDIC was created by Republic Act (R.A.) No. 3591  on June 22, 1963 as an
insurer of deposits in all banks entitled to the benefits of insurance under the 
PDIC Charter to promote and safeguard the interests of the depositing public
by way of providing permanent and continuing insurance coverage of
all insured deposits.
Based on its charter, the PDIC has the duty to grant or deny claims for deposit
insurance.

(Spouses Chugani v. Philippine Deposit Insurance Corp., G.R. No. 230037,

[March 19, 2018])
 PDIC HAS THE DUTY TO GRANT OR DENY CLAIMS
FOR DEPOSIT INSURANCE

In this case, it cannot be said that PDIC committed grave abuse of discretion in denying
petitioners claim for deposit insurance.
Section 4 (f) of R.A. No. 3591, as amended by R.A. No. 9576 states that deposit means the
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.
Section 2 (d) of PDIC Regulatory Issuance No. 2011-02 21 states that for deposit to be
considered as legitimate, it should be 1) received by a bank as a deposit in the usual course of
business; 2) recorded in the books of the bank as such; 3) opened in accordance with
established forms and requirements of the BSP and/or the PDIC.

(Spouses Chugani v. Philippine Deposit Insurance Corp., G.R. No. 230037, [March 19, 2018])
 PDIC HAS THE DUTY TO GRANT OR DENY CLAIMS
FOR DEPOSIT INSURANCE

Further, in Phil. Deposit Insurance Corp. v. CA, this Court held that in order for the claim for deposit
insurance with the PDIC may prosper, it is necessary that the corresponding deposit must be placed in the
insured bank.
Here, upon investigation by the PDIC, it was discovered that 1) the money allegedly placed by the
petitioners in RBMI was in fact credited to the personal account of Garan, hence, they could not be
construed as valid liabilities of RBMI to petitioners; 2) based on bank records and the certified list of the
bank's outstanding deposit liabilities, the alleged deposits of petitioners are not part of RBMI's outstanding
liabilities; and 3) the CTDs are not validly issued by RBMI, but were mere replicas of the unissued and
unused CTDs still included in the inventory of RBMI. Further, the act of petitioners in opening Time
Deposits and thereafter depositing several amounts of money through inter-branch deposits with Metrobank
and China Bank for the account of RBMI can hardly be considered as in the ordinary course of business.
Considering the above disquisitions, it is sufficiently established that the PDIC, did not commit any grave
abuse of discretion in denying petitioners' claim for deposit insurance as the same were validly grounded on
the facts, law and regulations issued by the PDIC.

(Spouses Chugani v. Philippine Deposit Insurance Corp., G.R. No. 230037, [March 19, 2018])
 PDIC HAS QUASI-JUDICIAL POWERS

On June 22, 1963, PDIC was created under RA 3591 as an insurer of deposits in all banks entitled to the
benefits of insurance under the said Act to promote and safeguard the interests of the depositing public. As
such, PDIC has the duty and authority to determine the validity of and grant or deny deposit insurance
claims. Section 16 (a) of its Charter, as amended, provides that PDIC shall commence the determination
of insured deposits due the depositors of a closed bank upon its actual take over of the closed bank. Also,
Section 1 of PDIC's Regulatory Issuance No. 2011-03, provides that as it is tasked to promote and
safeguard the interests of the depositing public by way of providing permanent and continuing insurance
coverage on all insured deposits, and in helping develop a sound and stable banking system at all times,
PDIC shall pay all legitimate deposits held by bona fide depositors and provide a mechanism by which
depositors may seek reconsideration from its decision, denying a deposit insurance claim. Further, it bears
stressing that as stated in Section 4 (f) of its Charter, as amended, PDIC's action, such as denying a
deposit insurance claim, is considered as final and executory and may be reviewed by the court only
through a petition for certiorari on the ground of grave abuse of discretion. 
Considering the foregoing, the legislative intent in creating the PDIC as a quasi-judicial agency is clearly
manifest.

(So v. Philippine Deposit Insurance Corp., G.R. No. 230020, [March 19, 2018])
 APPEAL FROM PDIC

On this score, Section 5 (g) of RA 3591, as amended by RA 10846, provides that the actions of PDIC
on matters relating to insured deposits and deposit liabilities may only be assailed before the Court of
Appeals via a Petition for Certiorari under Rule 65 of the Revised Rules of Court, viz.:
SECTION 7. Section 4 of the same Act is accordingly renumbered as Section 5, and is hereby
amended to read as follows:
DEFINITION OF TERMS
SEC. 5. As used in this Act. —
xxx xxx xxx
(g) x x x
The actions of the Corporation taken under Section 5(g) shall be final and executory, and may only
be restrained or set aside by the Court of Appeals, upon appropriate petition for certiorari on the
ground that the action was taken in excess of jurisdiction or with such grave abuse of discretion as to
amount to a lack or excess of jurisdiction. The petition for certiorarimay only be filed within thirty
(30) days from notice of denial of claim for deposit insurance. (Emphasis supplied)
(Servo v. Philippine Deposit Insurance Corp., G.R. No. 234401, [December 5, 2019])
 PDIC ROLE IN HANDLING BANKS IN DISTRESS

Second, the petition for liquidation may be filed ex parte by the PDIC without the
requirement of prior notice or any other action. The MB, on the other hand, is empowered
under the NCBA to take over banks without need for prior hearing. This is a valid exercise
of police power to protect the depositors, creditors, stockholders, and the general public. 
Third, the PDIC is not required to send notice of its petition before the RTC for the UDB's
liquidation or of the liquidation proceedings to the latter's majority or controlling
stockholders.
Section 30 (1), as cited above, categorically requires the MB to notify in writing the
bank's board of directors of its findings. Nowhere does it require the MB to notify the
majority stockholders of the bank as Yuseco argues. Hence, the lack of notice to the
stockholders does not make the petition illegal.

(Yuseco, Jr. v. Philippine Deposit Insurance Corp., G.R. No. 217899 (Notice), [September
28, 2016])
 TAX CLEARANCE FOR CLOSED BANK
ISSUE:
Whether or not a bank ordered closed and placed under receivership by the Monetary
Board of the BSP still needs to secure tax clearance certificate from the BIR before the
liquidation court approves the project of distribution of the assets of the bank.
RULING:
No. The procedure for involuntary dissolution and liquidation of a corporation under
the Corporation Code is different from that of the banking corporation under the New
Central Bank Act. A banking corporation is governed and regulated by a special law,
which is the New Central Bank Act which does not require the prior issuance of a tax
clearance from the BIR. Even if PDIC failed to file the final return of RBBI for the
year its operations were stopped, the BIR should have requested from the RTC an order
for the PDIC to submit the final return of RBBI not to secure a tax clearance.
(In Re Petition For Assistance In The Liquidation Of The Rural Bank Of Bokod
(Benguet ) Inc. , PDIC V BIR, Gr 158261 Dec 18, 2006)