MANILA, Philippines — The government’s deposit insurance fund (DIF) rose by nine percent to P214.8 billion last year, sufficient enough to cover for accounts that will be affected by bank closures.
In a report, state-run Philippine Deposit Insurance Corp. (PDIC) said its capital, called DIF, went up from P196.5 billion in 2019 as the growth in its reserve pool mitigated the decline in retained earnings.
At that rate, the DIF can insure around seven percent of deposit accounts in the banking system at P3.07 trillion, maintaining it within the 5.5 and eight percent range set by the PDIC.
According to the PDIC, the lower limit of 5.5 percent covers anticipated and unanticipated risks under usual circumstances. As for the upper limit of eight percent, it makes up for any additional threats to the banking system resulting from the expected and unexpected risks.
Broken down, reserves for insurance losses increased by about 16 percent to P195.6 billion last year from P168.7 billion in 2019. On the other hand, retained earnings in the DIF went down by over 35 percent to P16 billion from P24.8 billion.
Apart from the reserve stock and retained earnings, the government infused P3 billion in the DIF as a permanent insurance fund mandated under the PDIC’s charter.
Further, PDIC’s profit improved by nearly 14 percent to P9.8 billion from P8.6 billion, allowing it to expand its dividends remitted to the government to P4.9 billion.
The PDIC’s revenue also spiked by more than 10 percent to P41.7 billion, as assessments from banks, interest income and trading gains all recorded growths. Banks are required to pay a rate of one-fifth of one percent per annum based on the average deposits they manage.
Assessments from banks rose by over eight percent to P27.5 billion from P25.4 billion. Interest income, mainly from investments, also grew by close to two percent to P11.9 billion, while other income, gains, and non-operating income almost tripled to P2.3 billion.
For this year, the PDIC intends to keep the DIF at a level of at least 5.5 percent of bank deposits to protect account holders from the risks associated with closures. The agency added sustaining the DIF at that ratio promotes confidence and stability in the banking system.