Topic 6 PDIC Law

Summary

This video covers the Philippine Deposit Insurance Corporation (PDIC) and its role in protecting depositors. Established in 1963 under Republic Act 3591, the PDIC insures deposits up to PHP 500,000 per depositor in case of bank insolvency. The video explains the functions of PDIC, including deposit insurance, bank regulation, and liquidation of failed banks. It also details what types of deposits are covered, such as savings and time deposits, and highlights exclusions like investment products and illegal transactions. The PDIC ensures public confidence in the banking system by providing financial security to depositors.

Takeaways

• 😀 The Philippine Deposit Insurance Corporation (PDIC) was created by Republic Act 3591 in 1963 to insure deposits in banks in case of insolvency.
• 😀 The maximum deposit insurance coverage (MDIC) has been increased to PHP 500,000 under Republic Act 9576, signed in 2008.
• 😀 The PDIC ensures the stability of the banking system and promotes public confidence by covering deposits in case of a bank's failure.
• 😀 PDIC insures deposits in banks authorized by the Bangko Sentral ng Pilipinas (BSP), including commercial, savings, rural, and cooperative banks, as well as foreign bank branches in the Philippines.
• 😀 Deposits are covered by PDIC insurance up to PHP 500,000 per depositor, regardless of the number of accounts in the same bank.
• 😀 Joint accounts are insured separately, meaning each account holder can be insured up to PHP 500,000, even if the total account balance exceeds this amount.
• 😀 Exclusions from PDIC insurance include investment products (bonds, securities), trust accounts, and deposits related to fraudulent or unlawful activities.
• 😀 PDIC may adjust the maximum insurance coverage (MDIC), but any increase requires the approval of the President of the Philippines.
• 😀 In the event a bank fails, depositors with claims above PHP 500,000 can still file for excess claims during the bank's liquidation, but payment depends on available assets and the priority of claims.
• 😀 All operating banks in the Philippines are mandatory members of PDIC, including foreign banks with domestic branches, to ensure that depositors are covered by insurance.
• 😀 Foreign currency deposits are also insured by PDIC, with claims paid out in the equivalent amount in pesos, based on the exchange rate at the time of the claim.

Q & A

What is the purpose of the Philippine Deposit Insurance Corporation (PDIC)?

The PDIC's purpose is to provide deposit insurance for deposits in member banks, ensuring that depositors are protected in the event a bank becomes insolvent. This helps maintain public confidence and stability in the banking system.

How much deposit insurance coverage does the PDIC provide to depositors?

The PDIC provides a maximum deposit insurance coverage (MDIC) of PHP 500,000 per depositor for valid deposits in a closed bank.

What changes were introduced by Republic Act 9576 to the original PDIC law?

Republic Act 9576, signed into law on April 29, 2008, increased the maximum deposit insurance coverage to PHP 500,000 and granted PDIC additional powers, including the authority to conduct independent examinations of banks and issue sovereign bonds for financial strengthening.

What are the key functions of the PDIC?

The PDIC serves as a deposit insurer, a regulator of banks (alongside the BSP), and a receiver and liquidator of closed banks. It also ensures the prompt payment of insured deposits and supervises banks to ensure they follow sound banking practices.

Which types of banks are required to be members of the PDIC?

All operating banks in the Philippines, including commercial banks, savings banks, rural banks, cooperative banks, and even domestic branches of foreign banks, are required to be members of the PDIC.

How does PDIC determine the validity of a deposit?

A deposit is considered valid if it has been recorded by the bank with a corresponding inflow of cash, and it meets the general definition of a deposit under PDIC regulations. Unfunded or fraudulent deposits are not covered.

What happens if a depositor has more than PHP 500,000 in a closed bank?

If a depositor's total deposits exceed PHP 500,000, the excess amount may be claimed during the bank's liquidation process, but only if there are sufficient assets to cover the claim, and it will be subject to the liquidation hierarchy.

Are foreign currency deposits insured by the PDIC?

Yes, foreign currency deposits are insured by the PDIC under the Foreign Currency Deposit System Act (Republic Act No. 6426), and depositors may receive insurance in the same currency the deposit was denominated.

What types of deposits are not covered by PDIC insurance?

PDIC does not cover investment products such as bonds and securities, trust accounts, fictitious or fraudulent deposits, or deposits that are proceeds of unlawful activities as defined by the Anti-Money Laundering Act.

Can a depositor increase their PDIC insurance coverage by holding multiple accounts in the same bank?

No, the PDIC insurance coverage is based on the depositor, not the number of accounts. A depositor is only insured up to PHP 500,000, regardless of how many accounts they hold in the same bank.