The proposed amendment to Republic Act 3591 or the “Philippine Deposit Insurance Corp. (PDIC) Charter” has received backing from various institutions.
During a Senate hearing on Friday, the Bangko Sentral ng Pilipinas (BSP), Department of Finance, and Chamber of Thrift Banks (CTB), expressed their support for Senate Bills 1260 and 2089, which seek to increase the maximum deposit insurance coverage from P500,000 to P1 million of PDIC and attach the state-run firm to the central bank.
According to BSP Governor Benjamin Diokno, the proposal to attach PDIC to the Bangko Sentral for policy and program coordination will strengthen the cooperation between the two agencies, and will make collaboration efforts more efficient.
“We recognize the need for close coordination between PDIC and BSP to review current policies and processes, including those on bank resolution, consent to mergers and acquisition, and the issuance of cease and desist orders pertaining to unsafe and unsound banking, which are now proposed to be centralized in the BSP,” he continued.
Diokno also said the proposed expansion of PDIC authority to cover other BSP-supervised financial institutions will make the state deposit insurer future ready. PDIC may create deposit insurance schemes intended for these financial institutions.
He added the proposal to authorize PDIC to establish insurance arrangements for Islamic banks is consistent with the central bank’s active advocacy of pursuing financial inclusion.
“The foregoing amendments, including those that will strengthen operational efficiency and effectiveness will better equip PDIC to discharge its core mandates as liquidator and deposit insurance,” the Bangko Sentral chief emphasized.
For his part, Finance Secretary Carlos Dominguez 3rd highlighted the need to provide the PDIC Board with the flexibility to adjust the maximum deposit insurance coverage periodically based on prevailing economic indicators.
He recalled that the last time the PDIC’s deposit insurance coverage was increased was 12 years ago.
“The proposed amendments remove the tedious process of passing a law each time the maximum coverage needs to be adjusted. They will also do away with the requirement of a BSP-determined financial crisis to make a routine adjustment in the insurance coverage levels,” Dominguez stressed.
With this, he said the PDIC will be better capable of fulfilling its mandate of providing insurance coverage for small depositors and supporting a sound and stable banking system.
CTB President Cecilio San Pedro, meanwhile, said his group supports the proposed P1-million maximum deposit insurance coverage of PDIC but added that smaller lenders will find it hard to afford any increase in premiums.
“The increase in coverage will create stability for the banking system. This will boost public confidence and trust in the banking sector, however, banks are adversely affected by the pandemic, particularly their loan portfolios. Hence, we cannot afford any increase in premium,” he underscored.
PDIC said earlier that deposit insurance claims it paid to insured depositors in 2020 amounted to P124.11 million. Those payments represented claims for 7,072 valid deposit accounts maintained in five banks ordered closed in 2020, or 76 percent of the estimated total deposit accounts of 9,305.