PDIC charter doubles deposit insurance

Written by Jun Vallecera / Reporter

Wednesday, 29 April 2009 22:17

THE Philippine Deposit Insurance Corp. (PDIC) finally has a charter that allows it to douse financial fires among troubled banks before they become a financial conflagration. President Arroyo signed into law the amended PDIC charter or Republic Act 9576, on Wednesday, which not only doubled the deposit insurance cover to P500,000 but puts more teeth into its regulatory powers, as well. The PDIC is now empowered to determine which, and prescribe rules, on deposit products covered by insurance, and exclude those products that are deposit-insurance schemes. The PDIC is also now authorized to conduct independent special examination of banks and may even inquire into or examine deposit accounts to limit the risks to PDIC’s deposit-insurance fund arising from the fraudulent creation of deposit liabilities or manipulation of deposit records. The most infamous of the manipulative schemes were those allegedly resorted to by the Legacy group of banks under Celso de los Angeles where the splitting of deposit accounts magnified the insurance liabilities of the PDIC. Under the new charter, splitting of deposit accounts within 120 days prior to bank closure are no longer covered by the mandatory insurance cover. “Rampant splitting of accounts under the Legacy-linked banks accounted for the fact that very few depositors actually cried foul because their millions of pesos worth of exposure were returned intact through this expedient,” said Bangko Sentral ng Pilipinas deputy governor Nestor Espenilla Jr. PDIC president Jose Nograles said they are now also allowed “to look into bank deposits facing threatened or impending closure.” Exactly what the phrase means in practice is the subject of an ongoing effort to capture the letter of the law and codify it through development of an implementing rules and regulations, according to him. BSP Governor Amando Tetangco Jr. said this new PDIC power has to have “prior Monetary Board approval” before the corporation can do it—examine a bank account. He added that under the law, only the Monetary Board has the authority to order the closure of any bank and only appoints the PDIC to institute receivership or even liquidation of assets as required.