PDIC charter amendment benefits bank depositors

MANILA, Philippines - State-run Philippine Deposit Insurance Corp. (PDIC) expects approximately 50 million depositors to benefit from the new law signed by outgoing President Aquino enhancing depositor protection.

PDIC president Cristina Que Orbeta said RA 10846 amending the PDIC charter would ultimately redound to the benefit of the depositing public.

“The enhanced authorities will afford depositors better protection as PDIC may now address risks posed by problem banks early on. This will also enable PDIC to perform its role in maintaining financial stability and managing the Deposit Insurance Fund,” Orbeta said.

Under the law, she explained depositors would have quicker access to their insured deposits in the event of bank closure since PDIC now has the authority to pay insured deposits without netting out depositors’ loan obligations with the closed bank, and based on evidence of deposits and not on the closed bank’s records alone.

To further protect depositors from unsafe and unsound banking practices of some banks, Orbeta added the law also restored PDIC’s authority to terminate the insured status of banks that engage in unsafe and unsound banking practices.

With its enhanced resolution authorities, she explained PDIC would also be able to more effectively promote financial inclusion through early intervention in problem banks or open bank resolution.

In cases where bank closure becomes inevitable, the new law enhanced the chances of recovery by creditors of their claims against the assets of the closed bank by preventing the further dissipation of these assets through seamless transition from bank closure to liquidation.

The law does away with the 90-day receivership period and allows PDIC to proceed directly to liquidation.

The immediate assignment of encumbered assets to closed bank creditors, adoption of purchase of assets and assumption of liabilities as a mode of liquidation, and express prohibition on reopening of banks ordered closed by the Monetary Board of the Bangko Sentral ng Pilipinas would help enhance recovery rate for creditors of closed banks.