PDIC, TLA, Bank Secrecy

• Philippine Deposit Insurance Company
• PDIC is a government instrumentality created in 1963 by virtue of R.A. 3591 to insure the deposits of all banks which are entitled to the benefits of insurance.
• Objective of PDIC:

  1. Protect the depositing public.
  2. Promote financial stability.
• Functions of PDIC:

  1. Deposit Insurer
  2. Co-regulator of banks
  3. Receiver and Liquidator of banks
• Insured Deposits: (Maximum Insurance coverage)

  Amount: not exceeding P500,000
• Type of deposits covered by PDIC:

  1. Savings Deposit
  2. Special Savings
  3. Demand Account
  4. Negotiable Order of Withdrawal (NOW)
  5. Certificate of Time Deposits
  6. Foreign Currency Deposits
• Deposit Insurer – to promote and safeguard the interest of the depositing public by providing insurance to insured deposits.
• When can the PDIC conduct an insurance risk evaluation on the bank, and BSP can examine, inquire and look into deposits in the banks?

  When the bank is capital-deficient.
• A joint account regardless of whether the conjunction 'and,' 'or, ‘and/or' is used, shall be insured separately from any individually-owned deposit account. True or false?

  True
• Adjustment of MDIC or Maximum Coverag requirements:

  1. In case of systematic risk
  2. Unanimous vote of BOD, chaired by SOF
  3. Approval of the President
• Modes of Payment:

  1. by Cash
  2. by making available to each depositor a transferred deposit in another insured bank
• Excluded Deposits


  • Investment products such as bonds and trust accounts
  • Unfunded, fictitious or fraudulent deposit accounts
  • Deposits emanating from unsafe and unsound banking practices
  • Deposits that are proceeds of an unlawful activity (Anti-Money Laundering Act)
  • Splitting of Deposits - a deposit account with outstanding balance more than 500,000 is BROKEN DOWN AND TRANSFERRED to two or more accounts in the name of another person or entities with no beneficial ownership in the transferred deposit names within 120 days immediately preceding or during a bank holiday or closure issued by the monetary board (for the purpose of availing the MDIC)
  • Deposits payable OUTSIDE of the Philippines (like foreign branches)
  • Deposit products/money placement by the head office of a foreign bank in its branch in the PH because there is only one entity
• Co-Regulator of Banks - PDIC works closely with the country's financial regulators such as the BSP to ensure the stability of the banking system. Jointly with the BSP, the PDIC conducts examination of banks as to ensure that it follows section 5:

  • Assets are adequate enough to meet liabilities.
  • If bank committed unsafe, unsound and unlawful practices.
• PDIC may terminate the insured status of the bank that fails to comply, with section 5, within 30 days from notice with any cease and desist order issued by BSP.
• Whenever a bank is ordered closed by the Monetary Board, the PDIC shall be designated as receiver and it shall proceed with the takeover and liquidation of the closed bank.
• RECEIVER – PDIC is empowered to represent and act for and on behalf of the closed bank.
• LIQUIDATION – a liquidation proceeding involving the administration and disposition of an insolvent’s assets for the benefit of its creditors.
• What is the winding up period for banks?

  6 months
• The powers and functions of its directors, officers and stockholders are terminated upon closure.
• All assets of the closed bank shall be deemed in *custodia legis* in the hands of the receiver, and may not be subject to attachment, garnishment, execution, levy or any other court processes. True or False?

  True
• SYSTEMATIC RISK

  • refers to the possibility that failure of one bank to settle net transactions with other banks will trigger a chain reaction, depriving other banks of funds leading to a general shutdown of normal clearing and settlement activity.
• DETERMINATION OF AMOUNT DUE

  1. Per Bank Rule - Such that if X has a deposit with A bank and B bank, and both were to be closed. X has deposit of 500,000 in each bank (Total: 1 million)
  2. Per Depositor, Per Capacity Rule - All deposits in the bank maintained the same right and capacity for his benefit (para sa iisang tao) either in his own name or in the of other shall be added together in determining the insured amount.
• Person X deposited P500,000 in Bank A and P800,000 in Bank B. How much is his insured deposit?

  P1,000,000
• Juan deposited 300,000 in Bank X in trust for Selena. Who is the depositor with insured deposit?

  Selena
• Juan has a deposit of 100,000 by Selena. Who is the depositor with insurance?

  Juan
• Juan deposited 200,000 for the account of Selena. Who is the insured depositor?

  Selena
• JOINT ACCOUNTS: An Individual who maintains both individual and joint accounts in a bank may be insured up to a total of P1,000,000; 500k for his individual account, another 500k for ALL his joint accounts. True or False?


  True
• If Juan deposited 600,000 in Bank X, and has a deposit of 500,000 in his name and Maria, as well as, 800,000 in the name of him or Pedro. How much is the total insured deposit of Juan?

  His individual account will have? 500,000 insured, and 100,000 uninsured.

  Joint accounts will have? 250,000 for him and maria as insured, and 250,000 for him and Pedro, for a total of 500,000.
• This act's purpose is to protect its citizens from a lack of awareness of the true cost of credit to the user by assuring a full disclosure of such cost. What is this act?

  Truth in Lending Act
• Finance Charge - this includes interest, fees, service charges, discounts, and such other charges.
• Obligation of the creditor under TLA:

  1. Furnish the information in writing relating to the credit.
  2. It shall be furnished to the borrower prior to the consummation of the transaction.
• In case of creditor’s non-compliance with his obligation, the creditor shall pay whichever is greater:

  • P100
  • 2x the cost of finance charge

  However, such liability shall not exceed P2,000 on any credit transaction.

  
  

  Furthermore, the lender shall have no right to collect such charge or increase stipulated in the note.

  
  

  However, such failure of the lender shall not affect the validity or enforceability of any transaction.
• Under TLA, section 5 of BSP circular no. 755, the following information are required to be disclosed:

  1. Amount to be financed

  2. Finance charge in peso and centavos

  3. Net proceeds of the loan;

  4. Percentage that finance charge bears to total amount to be financed expressed simple annual rate or an ER.
• Manner of Computing Interest:

  • For Lump-Sum – interest is based on the outstanding balance of a loan at the beginning of an interest period.
  • For Installments – interest is based on the outstanding balance of the loan at the beginning of each installment period.
• Registration of CGE (Credit Granting Facilities)

  • After registration and payment of fee, an acknowledge of Registration shall be issued and shall be valid for 3 years from the date of issuance.
• Renewal of registration:

  Renewable on the anniversary month when it was originally registered.
• Purpose of Bank Secrecy law:

  1. encourage people to deposit in banks
  2. Discourage private hoarding in order for banks to utilize the money and help economic development
• PROHIBITED ACTS in BSL:

  • By the BANK - it shall be unlawful for any of a banking institution to disclose to any person other than those mentioned in Section two hereof any information concerning said deposits.
• PROHIBITED ACTS IN BSL:

  • By any person, government official, bureau or office- to examine, inquire or look into the deposits of whatever nature with banks by any person.
• BSL EXCEPTIONS (When it can be disclosed)

  Recite the PIO-GUAPO-CAA abbreviation.

  Permission - WRITTEN

  Impeachment cases

  Order of competent court

  Garnishment

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