PDIC

PDIC ACT (RA 3591, AS AMENDED)

The Philippine Deposit Insurance Corporation (PDIC) is a government instrumentality created in 1963 by virtue of Republic Act 3591 to insure the deposits of all banks which are entitled to the benefits of insurance. The PDIC is an attached agency of the Department of Finance.

The latest amendments to RA 3591 are contained in RA 10846 signed into law on May 23, 2016. RA 10846 empowered PDIC with stronger authorities to protect the depositing public and promote financial stability. The new law also includes important provisions to ensure that the PDIC remains financially and institutionally strong to fulfill its mandate under its Charter

PDIC now has the authority to help depositors have quicker

access to their insured deposits should their bank close; resolve problem banks while still open; hasten the liquidation process for closed banks; mete out stiffer

sanctions and penalties against those who engage in unsafe and unsound banking practices

Under amendment, depositors would have quicker access to their insured deposits in the event of bank closure since PDIC now has the authority to pay insured deposits without netting out depositors' loan obligations with the

closed bank and based on evidence of deposits and not on the closed bank's records alone.

With its enhanced resolution authorities, PDIC would also be able to more effectively promote financial inclusion through early intervention in problem banks or open bank resolution. In cases where bank closure becomes inevitable, the new law enhanced the chances of recovery by creditors of their

claims against the assets of the closed bank by preventing the further dissipation of these assets through seamless transition from bank closure to liquidation.

The new law does away with the 90-day receivership period and allows PDiC to proceed directly to liquidation. The immediate assignment of encumbered assets to closed bank creditors, adoption of purchase of assets and

assumption of liabilities as a mode of liquidation, and express Prohibition on reopening of banks ordered closed by the Monetary Board of the Bangko Sentral ng Pilipinas would help enhance recovery rate for creditors of closed banks

Functions: to act as

1. Deposit Insurer - the PDIC shall promote and safeguard the interest of the depositing public by way of providing permanent and continuing insurance coverage on all insured deposits.

2. Co-regulator of banks- as a bank regulator, the PDIC

is empowered to examine and investigate banks.

3. Receiver and liquidator of closed banks - the PDIC as receiver shall control, manage and administer the affairs of the bank.

INSURED DEPOSITS
Amount due to any bona fide depositor for legitimate deposits in an insured bank net of any obligation of the depositor to the insured bank as of the date of closure, but not to exceed P500,000.
Examples of types of deposits covered:
1. Savings Deposit
2. Special Savings
                     3. Demand/Checking Account
                      4. Negotiable Order of Withdrawal (NOW)
                      5. Certificate of Time Deposits
                  6. Foreign currency Deposit

Adjustment of maximum deposit insurance: the amount of coverage may be adjusted in such amount, for such a period, and/or for such deposit products,
provided:
1. The Monetary Board has determined that there is a condition that threatens the monetary and financial stability of the banking system that may have systematic consequences as defined under RA No. 3591;
2. Approval by a unanimous vote of the Board of Directors of the PDIC in a meeting called for the purpose and chaired by the DOF Secretary;
3. Approval of the President of the Philippines.

Under Section 22 of the PDIC Charter, a systemic risk refers to the possibility of 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. It also means the likelihood of a Sudden, unexpected collapse of confidence in a significant portion of the banking or financial system with potentially large real economic effects.

Coverage: The deposit liabilities of any bank or banking institution, which is engaged in the business of receiving deposits as herein defined on the effective date of the PDIC Act, or which thereafter may engage in the business receiving deposits, shall be insured with the PDIC.

DEPOSIT ACCOUNTS NOT ENTITLED TO PAYMENT(SHA OU²I)
1. Deposit products that resulted from splitting of deposit.
Splitting of Deposit - occurs whenever:
a. A deposit account with an outstanding balance more than P500,000 is broken down and transferred to two or more accounts in the name of persons or entities who have no beneficial ownership in the transferred deposits in their names
b. within 120 days immediately preceding or during a bank-declared bank holiday or immediately preceding a closure order issued by the Monetary Board
c. for the purpose of availing the maximum deposit insurance coverage.

This is considered a criminal act punishable by imprisonment of not less than 6 years but not more than 12 years or a fine not less than P50,000 but not more than P10,000,000, or both, at the discretion of the court.
2. Deposit products or money placements by the head office of a foreign bank in its branch in the Philippines because there is only one entity.
3. Deposits that are determined to be the proceeds of an unlawful activity as defined under RA 9160 or the Anti-Money Laundering Act, as amended
4. Deposits payable in a place outside the Philippines (like those in foreign branches)
5. Deposit accounts or transactions which are unfunded and that are fictitious or fraudulent
6. Deposit accounts or transactions constituting and/or emanating from, unsafe and unsound banking practice/s, as determined by PDIC, in consultation with BSP, after due notice and hearing, and publication of a cease and desist order issued by PDIC against such deposit accounts or transactions.
7. Investment products such as bonds and securities, trust accounts and other similar instruments

DETERMINATION OF THE AMOUNT DUE

Per Bank: The entitlement to deposit insurance is on a per bank bases. Such that if X has a deposit to A deposit Bank and B Bank and both banks closed, X is entitled to P500,000 insurance coverage for each bank

Per Depositor,Per Capacity Rule: all deposits in the bank
maintained in the same right and capacity for his benefit either in his own name or in the name of others shall be added together in determining the insured amount, and regardless of the type of account

Acounts "By" "In Trust For (ITF)" or "For the or "For the Account of(FAO)" another person:
    1. In a"By" account (Juan by Pedro) -Juan is the depositor.
2. In an "ITF" account (Juan ITF Pedro) - Pedro is the depositor
3. In a "FAO" account (Juan FAO Pedro) - Pedro is the depositor.

Individual Accounts: All individual accounts of a depositor, including the above where ownership is vested in him, shall be insured to a maximum of
P500,000.

Joint accounts: A joint account regardless of whether the conjuction "and","or", "andfor" is used shall be insured separately from any individually owned deposit account, provided that:
1. lf the account is held jointly by two or more natural persons, or by two or more juridical persons or entities, the maximum insured deposit shall be
divided into as many equal shares as there are individuals, juridical persons or entities, unless a different sharing is stipulated in the document of deposit, and
2. If the account is held by a juridical person or entity jointly with one or more natural persons, the maximum insured deposit shall be presumed to belong entirely to such juridical person or entily.

Provided, further, that the aggregate of the interest of each co-owner over several joint accounts, whether owned by the same or different combinations of individuals, juridical persons or entities, shall likewise be subject to the maximum insured deposit of P500,000

The P500,000 entitlement to joint deposits is separate from the 500,000 applicable to the individually owned accounts by the depositor, giving him a maximum of P1,000,000 insurance coverage.

In short, a depositor who maintains both individual and joint accouns may be insured up to a total of P1,000,000: P500,000 for all his individual accounts, P500,000 for all his joint accounts.

PROCEDURE FOR THE PDIC
1. The PDIC shall commence the determination of insured deposits due the depositors of a closed bank upon its actual takeover of the closed bank.
2.PDIC shall give notice to the depositors of the closed bank of the insured deposits due them by whatever means deemed appropriate by the Board of Directors.
3.PDIC shall publish the notice once a week for at least 3 consecutive weeks in a newspaper of general circulation Or, when appropriate, in a newspaper circulated in the community or communities where the closed bank or its branches are located.

Certificate of Deposit: No owner/holder of any negotiable
certificate of deposit shall be recognized as a depositor entitled to the rights in PDIC Act unless his name is registered as owner/holder thereof in the books of the  issuing bank.

Claim: Claims are filed during the claims settlement operations period, as announced in the Notice to Depositors published in national or local newspapers, or posted in the bank premises and conspicuous places within the locality, and in the PDIC website.

Those required to file claims:
1. Depositors with valid deposit accounts with balances of more thanPhp100,000.
2. Depositors who have outstanding obligations with the closed bankregardless of amount of deposits.
3. Depositors with account balances of less than Php100,000 who have no updated addresses in the bank records or who have not updated theiraddresses through the Mailing Address Update Form (MAUF) issued by the PDIC.
4. Depositors who maintain their accounts under the name of business entities, regardless of type of account and account balance.
5. Depositors with accounts not eligible for early payment, regardless of type of account and account balance per advice of PDIC.

Those NOT required to file claims: Depositors with valid deposit accounts with balances of Php100,000 and below are not required to file claims provided they have no obligations with the closed bank and have complete and updated addresses in the bank records or have updated these through the Mailing Address Update Form (MAUF) issued by the PDIC. Depositors with deposit balances of Php100,000 and below may update their addresses using the MAUF and submit to PDIC representatives stationed at the closed bank premises before the start of the onsite claims settlement operations

These depositors are entitled to immediate/early payment of deposit insurance claim as part of PDIC's initiative to provide convenience to small depositors. Payments to these depositors are sent as postal money orders to the depositors' mailing addresses.

Who should sign the insurance claim?
1. Depositor of the account - for depositors 18 years old and above
2. Parent - if the depositor is below 18 years old
3. Agent-in the case of "By" accounts
4. Trustee - in the case of "In Trust for (ITF" accounts
5. Each Depositor - in the case of joint accounts such as "Or", "And/Or" or "And" Accounts

Period for the depositor to file and enforce claim:
1. Period to file claim - 2 years from actual takeover of the closed bank;
2. Period to enforce claim - 2 years after the 2-year period to file a claim


Proof of claim: The PDIC, in its discretion, may require proof of claims to be filed before paying the insured deposits, and that in any case where the PDIC is not satisfied as to the validity of a claim, it may require final determination
of a court of competent jurisdiction before paying such claim.


Effects of non-filing or non-enforcement of claim within the periods above:
1. All rights of the depositor against the PDIC with respect to the insured deposit shall be barred,
2. All rights of the depositor against the closed bank and its shareholders or the receivership estate to which PDIC may have become subrogated, shall thereupon revert to the depositor.
3. PDIC shall be discharged from any liability on the insured deposit.

Modes of payment: made as soon as possible either:
1. By cash
2 By making available to each depositor a transferred deposit in another insured bank in an amount equal to insured deposit of such deposit

Withholding of payment: The PDIC may withhold payment of such portion of the insured deposit for the payment of any liability of such depositor as a stockholder of the closed bank, or of any liability of such depositor to the
closed bank or its receiver, which is not offset against a claim due from such bank, pending determination and payment of such liability by such depositor
or any other liable therefor.

Effect of payment: PDIC shall be subrogated to all rights of the depositor against the closed bank to the extent of such payment. Such subrogation shall include the right on the part of PDIC to receive the same dividends and
payments from the proceeds of the assets of such closed bank and recoveries on account of stockholders' liability as would have been payable to the depositor on a claim for the insured deposits, but such depositor shall retain his claim for any uninsured portion of his deposit.

Under Section 21 of the PDIC Charter, payment of an insured deposit to any person by PDIC shall discharge the PDIC, and payment of transferred deposit to any person by the new bank or by an insured bank in which a transferred deposit has been made available shall discharge PDIC and such new bank or other insured bank, to the same extent that payment to such person by the closed bank would have discharged it from liability for the insured deposit.

Preference: All payments by PDIC of insured deposits in closed banks partake of the nature of public funds, and as such, must be considered a preferred credit similar to taxes due to the National Government in the order of
preference under Article 2244(9) of NCC, provided further, that this preference shall be likewise effective upon liquidation proceedings already commenced and pending as of the approval of PDIC Act, where no distribution of assets has been made.

Period for the PDIC to settle claim: 6 months from the date of filing of the claim.

Failure to settle the claim within 6 months from the date of filing of claim for insured deposit, where such failure was due to grave abuse of discretion, gross negligence, bad faith or malice, shall upon conviction, subject the directors, officers or employees of PDIC responsible for the delay, to
imprisonment from 6 months to one year.

Except: that the period shall not apply if the validity of the claim requires the resolution of issues of facts and/or law by another office, body or agency.