The Implementing Rules and Regulations (IRR) of RA No. 11840 or “An Act Establishing The Philippine Deposit Insurance Corporation (PDIC), defining its powers and duties, and for other purposes,” which in effect amended R.A. No. 3591 or the PDIC Charter, was signed recently in a virtual ceremony.
Present during the signing ceremony were Bangko Sentral ng Pilipinas (BSP) Chief Felipe M. Medalla, PDIC President and CEO Roberto B. Tan, and Department of Finance (DOF) Secretary Benjamin E. Diokno. BSP’s Medalla and the DOF’s Diokno are the Chairperson and Vice Chairperson, respectively, of the PDIC Board of Directors.
The IRR takes effect 15 days after its publication in the Official Gazette or in a newspaper of general circulation.
The Philippine Deposit Insurance Corporation (PDIC) was established on June 22, 1963, by Republic Act No. 3591. Its aim is to provide depositor protection and help maintain stability in the financial system by providing deposit insurance.
Salient provisions of the amended charter explained
One of the salient provisions of the amended PDIC Charter is the authority granted to the PDIC to adjust the maximum deposit insurance coverage (MDIC), without a need for legislation, based on inflation or in consideration of other economic indicators as may be deemed appropriate by the PDIC Board.
Under the amended charter, the PDIC Board shall review the MDIC every three years and adjust the same as may be warranted.
Since June 1, 2009, the MDIC has been set at P500,000 per depositor, per bank. All the deposit accounts of a depositor in a closed bank maintained in the same right and capacity shall be added together. A joint account shall also be insured separately from any individually-owned deposit account.
Additionally, the state deposit insurer will now be mandated to provide insurance coverage to Islamic bank products or arrangements classified as deposits by the BSP.
Due to the peculiar characteristics of Islamic banking, the amended PDIC Charter shall likewise authorize the establishment of separate deposit insurance funds, or insurance arrangements or structures or takaful, to cover these types of deposit products.
The PDIC can now also sell closed bank assets to financial institution strategic transfer corporations (FISTCs). Specifically created under the FIST Act, FISTCs can purchase the non-performing assets of financial institutions including loans and real and other properties acquired (ROPA), both of which comprise the biggest chunks of assets held by the PDIC as the statutory liquidator of closed banks.
PDIC, now an attached agency to the BSP
Under the new law, the PDIC is now also an attached agency to the BSP for policy and program coordination.
PDIC President Tan expressed optimism that the amended PDIC Charter would redound to better protection for the depositing public.
“Now equipped with the amended Charter and its IRR, the PDIC is more confident in its enhanced capability to protect depositors under any economic conditions. As such, the depositing public can continue feeling secure about entrusting their hard-earned money with banks. Truly, our brand promise to the depositing public — Bank deposit mo, protektado — is made more significant and meaningful with these recent legislative amendments,” the PDIC President said.
Governor Medalla welcomed the strengthened synergy between BSP and PDIC, saying, “The BSP looks forward to a continued partnership with the PDIC. We will continue to support reforms geared towards the strengthening of the financial sector, with an emphasis on improving regulatory practices and promoting good governance and adherence to global best practices.”
For his part, Finance Secretary Diokno expressed his full support for the amended PDIC Charter, citing enhanced coordination and a more collaborative policy framework within the financial sector.
“Not only does this development further strengthen and expand the financial safety net for depositors and creditors of our banks, (but) it also allows for increased flexibility in the maximum deposit insurance coverage, allowing us to respond more quickly to economic indicators such as inflation, without waiting for legislation,” Secretary Diokno said.
R.A. No. 11840 lapsed into law on June 17, 2022, 30 days after it was presented by Congress to the Office of the President of the Republic of the Philippines. The law took effect on July 20, 2022.