RA 3591 - PDIC

• The Philippine Deposit Insurance Corporation (PDIC) is a government instrumentality created in 1963 by Republic Act 3591 to insure the deposits of all banks entitled to the benefits of insurance
• The latest amendments to RA 3591 are contained in RA 9576, signed into law on April 29, 2009, which increased the maximum deposit insurance coverage to P500,000.00
• PDIC, an attached agency of the Department of Finance, has the authority to determine which deposit products are covered by insurance, conduct independent special examinations of banks, and inquire into or examine deposit accounts of ailing banks in the event of unsafe and unsound banking practices
• Provisions added to strengthen PDIC include exemption from income tax, final withholding tax, value-added tax on assessments collected from member banks, and local taxes
• With the approval of the President of the Philippines, PDIC is authorized to issue bonds, debentures, and other obligations for providing liquidity for settlement of insured deposits in closed banks and for financial assistance
• All notes, debentures, bonds, or obligations issued by PDIC are exempt from taxation and fully guaranteed by the Government of the Republic of the Philippines
• The composition of the PDIC board includes the Secretary of Finance as the ex officio Chairman, the Governor of the BSP as an ex officio member, the President of the Corporation appointed by the President of the Philippines, and four other members from the private sector
• The permanent insurance fund of PDIC is Three billion pesos (P3,000,000,000.00)
• PDIC's overall mandate is to provide permanent and continuing deposit insurance coverage for the depositing public to promote public confidence and stability in the economy
• PDIC's functions include being a deposit insurer, co-regulator of banks, and receiver & liquidator of closed banks
• PDIC is empowered to examine and investigate banks, with examination involving an evaluation of the bank's current status and compliance with set standards, while investigation focuses on specific acts or omissions uncovered via an examination or complaint
• The PDIC is the statutory receiver and liquidator of closed banks, taking over closed banks, administering their assets, records, and affairs, managing and preserving assets for the benefit of creditors
• As a receiver, the PDIC has the authority to adjust the interest rate on unpaid interests on deposits if the rate is deemed unreasonably high compared to market rates
• Assets of the closed bank under receivership are deemed in custodia legis in the hands of the receiver, not subject to court processes like attachment, garnishment, or execution
• The PDIC, as a receiver, can collect loans and other claims of the closed bank, modifying, compromising, or restructuring the terms and conditions of such loans or claims for the benefit of creditors and claimants
• The maximum deposit insurance coverage by the PDIC is P500,000 per depositor, effective June 1, 2009, with all deposit accounts by a depositor in a closed bank maintained in the same right and capacity added together
• The PDIC may propose to adjust the maximum deposit insurance coverage, subject to the approval of the President of the Philippines, in case of a condition threatening the monetary and financial stability of the banking system with systemic consequences
• The term 'deposit' refers to the unpaid balance of money or its equivalent received by a bank in the usual course of business, with the PDIC having the authority to adjust interest rates on deposits if deemed necessary
• A 'transfer deposit' is a deposit made available to a depositor by the PDIC as payment of an insured deposit in a closed bank and assumed by another insured bank, while 'trust funds' are funds held by an insured bank in a fiduciary capacity
• Single accounts are maintained solely by a depositor, while joint accounts are held jointly by two or more natural persons or entities, with joint accounts insured separately from any single or singly-owned deposit account
• An 'insured deposit' is the amount due to any bona fide depositor for legitimate deposits in an insured bank, net of any obligation of the depositor to the bank, not exceeding P500,000, with specific rules for joint accounts and juridical persons
• PDIC will not pay deposit insurance for certain accounts or transactions, including investment products, unfunded or fraudulent deposit accounts, proceeds of unlawful activities, amounts exceeding the insured deposit, deposits payable outside the Philippines, and deposits resulting from splitting of deposits
• Instances where deposits are not covered by PDIC insurance:

  • Investment products like bonds, securities, and trust accounts
  • Unfunded, fictitious, or fraudulent deposit accounts
  • Deposit products from unsafe and unsound banking practices
  • Deposits from unlawful activities as defined by the Anti-Money Laundering Law
• PDIC insurance coverage does not increase by having several accounts in the same name in an insured bank
• Deposits in different banking institutions are insured separately, but if a bank has one or more branches, the main office and all branch offices are considered as one bank for insurance purposes
• Depositors with valid deposit accounts with balances of more than P100,000, outstanding obligations with the closed bank, incomplete mailing address, accounts under business entities, and deceased depositors filing through legal heirs are required to file deposit insurance claims
• Requirements for filing a claim with PDIC:

  • Original evidence of deposits like savings passbook, certificate of time deposit, bank statement, used or unused checks, or ATM card
  • One valid original photo-bearing identification document with clear signature of depositor/claimant
  • For depositors below 18 years old, a photocopy of birth certificate and valid ID of the parent
  • Original copy of a notarized Special Power of Attorney for claimants who are not the signatories in the bank records
• Depositors with valid deposit accounts with balances of P100,000 and below are not required to file claims if they have no obligations with the closed bank or have not acted as co-makers of these obligations
• PDIC covers only the risk of a bank closure ordered by the Monetary Board, not losses due to theft, fire, or closure by other reasons like strike or public disorder
• Insurance premium for PDIC is paid by the banks, assessed at 1/5 of 1% per annum of the bank's assessment base
• In determining the insured amount by PDIC, the outstanding balance of each account is adjusted, interests are updated, withholding taxes are deducted, accounts maintained by a depositor in the same right and capacity are added together, and unpaid loans and other obligations are deducted, with insured deposit not exceeding P500,000
• Deposits in branches and subsidiaries of foreign banks licensed by the Bangko Sentral ng Pilipinas to perform banking functions in the Philippines are insured by PDIC
• PDIC insurance coverage is not determined on a per-account basis, and the type of account (checking, savings, time deposit) does not affect the amount of insurance coverage
• Depositors will be advised through media and posters at the closed bank premises on the schedule of distribution of claim forms, receiving of claim forms by PDIC, and the deadline for filing claims
• Membership of banks to PDIC is mandatory, so all operating banks are members of PDIC
• Foreign currency deposits are insured by PDIC according to RA 6426 and Central Bank Circular No. 1389, with depositors receiving payment in the same currency as the insured deposit
• PDIC insurance coverage cannot be increased by having several accounts in the same name in an insured bank
• Depositors with valid deposit accounts with balances of P100,000.00 and below are not required to file claims if they meet certain conditions:

  • Have no obligations with the closed bank, acted as co-makers of these obligations, or are not spouses of the borrowers
  • Have a complete mailing address found in the bank records or updated their addresses through the Mailing Address Update Form (MAUF) of PDIC before the start of the onsite claims settlement operation
  • Have not maintained the account under the name of business entities
• Claims for insured deposits 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
• Deposit records are examined before the start of servicing/settlement of claims, and claims are evaluated and processed according to PDIC's standard procedures