Hike in maximum deposit insurance coverage sought

THE House Committee on Banks and Financial Intermediaries has endorsed for plenary approval a measure giving the staterun Philippine Deposit Insurance Corp. (PDIC) the power to increase the maximum deposit insurance coverage (MDIC), which has stood at only up to P500,000 per depositor per bank.

House Bill (HB) 8818 seeks to strengthen the regulatory framework of the PDIC and to “promote and safeguard the interests of the depositing public by providing insurance coverage on all insured deposits and helping maintain a sound and stable banking system.”

The bill grants the PDIC the power to increase the MDIC to an amount indexed to inflation or other economic indicators, subject to review and/ or adjustment every three years.

Through a series of acts of Congress, Makati City Rep. Luis N. Campos Jr., one of the authors of the bill, said the MDIC, which stood at P40,000 in 1984, has been increased three times to P100,000 in 1992; P250,000 in 2004; and, P500,000 in 2009.

Banks pay for the compulsory insurance premiums to guarantee the MDIC, Campos explained.

“The committee’s proposal, as contained in substitute HB 8818, is even better because the PDIC will now be allowed not just to initially raise the MDIC, but also periodically thereafter,” Campos said.

“We are confident that once empowered, the PDIC will promptly enlarge and restore the MDIC’S full value of protection, considering the erosion of the peso’s purchasing power over the years,” he added.

Under HB 8818, the state-run deposit insurer will become an attached agency of the Bangko Sentral ng Pilipinas (BSP).

The bill also seeks to give the PDIC the power to issue rules and establish separate insurance funds and insurance arrangements or structures, taking into consideration the peculiar characteristics of Islamic banking and other deposit products as defined by the BSP.

The bill also designates the PDIC as statutory receiver of Bsp-supervised non-bank institutions with deposits or products covered by deposit insurance. The measure seeks to restrict the power to conduct bank examination to cases where there is a finding of fraud or unsafe or unsound banking related to deposit taking or a failure of corrective action, such action by PDIC is deemed appropriate and necessary by the BSP.

It also clarifies the applicability of Repubic Act 7656 (Dividend Law) by defining what constitutes income from other sources.

It also removes from the PDIC the power to issue cease-and-desist orders pertaining to depositrelated unsafe and unsound banking, which power shall be vested with the BSP.