College of Business

FM103 (Banking and Financial Institutions)

CHAPTER 9
PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC)

Role of PDIC
 It is the 2nd pillar of support to the Philippine banking industry.
 It provides the adequate depositor protection and education, and the immediate
processing and settlement of depositors claims.
 An attached agency of Department of finance wherein it is a government
corporation created by virtue of R.A. 3691 for the purpose of insuring deposits in
banks that are entitled to the benefit of insurance.
 Includes receivership and liquidation as its additional important functions.
 The PDIC draws upon its net insurance reserves or consolidated resources in the
carrying out of its operation.
 It extends insurance coverage to 967 member banks, composed of 52 commercial
banks, 116 thrift banks, and 799 rural banks.

Board of Directors: Composition and Authority

The following constitute the membership of the board of directors:

1. The Secretary of Finance, who is ex-officio chairman of the board without
compensation.

2. The governor of the Bangko Sentral, who is an ex-officio member of the board
without compensation.

3. The president of the corporation, who is appointed by the president of the

Philippines from either the government or private sector to serve on full-time basis
for a term of six (6) years. The president also serves as vice chairman of the board.

4. Two (2) members from the private sector are appointed for a term of six (6) years
without reappointment by the president of the Philippines.

The Board of Directors shall have the authority:

1. To prepare and issue rules and regulations it considers necessary for the effective
discharge of its responsibilities.

2. To direct the management, operations, and administration of the corporation.

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 3. To appoint, establish the rank, fix the remuneration, and remove any officer or
employee of the Corporation for cause, subject to Civil Service and pertinent
compensation laws

4. To authorize such expenditures by the corporation as are in the interest of the

effective administration and operation of the Corporation.

President: Powers and Duties

1. To prepare the agenda for the meeting of the board and to submit for the
consideration of the board the policies and measures.

2. To execute and administer the policies and measures approved by the board.

3. To direct ad supervise the operations and internal administration of the corporation

in accordance with the policies established by the board.

4. To represent the Corporation, upon prior authority of the board.

5. To authorize, with his signature, upon prior authority of the board, contracts
entered into by the corporation, notes and securities issued by the corporation,
notes and the annual reports, balance sheets, profits and loss statement
correspondence and other documents of the corporation.

6. To represent the corporation, either personally or through counsel, in all legal

proceedings or actions.

7. To delegate, with prior approval of the board of directors, his power to represent
the corporation to other officers of the corporation.

8. To exercise such powers as may be vested in him by the board.

Sources of Funds

 The principal sources of funds are the capital infusion of the government in the form
of a Permanent Insurance Fund (PIF) which is initially capitalized at P5 million,
incomes from insurance premium assessments on member banks, and investments
in government securities.

 Investments increased as debts were reduced with the strengthening of capital and
greater collection in premiums.

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Termination and Reinstatement of Insured Status of Banks
Pursuant to the provision in R.A 3591 as amended and in relation to the PDIC
Amendment Rules and Regulations, PDIC issued the ff. guidelines on the termination and
reinstatement of insured status of banks due to non-payment of assessment:

1. PDIC shall terminate the insured status of a bank upon its continued failure or
refusal to pay the assessment, due semi-annually, computed by multiplying the
assessment rate as determined by the PDIC Board of Directors and the banks
liability for deposits.

2. First demand letter shall be sent to banks through registered mail. Interest charges
at the legal rate of 12% per annum, reckoned from due date/s, shall be imposed
upon these banks.

3. Failure to comply within 30 days after receipt of the first demand letter shall
constitute willful failure or refusal by the bank to file the required certified
statement and pay the corresponding assessment and interest charges. Then PDIC
shall send the second demand letter through registered mail.

4. Termination proceedings of the banks insured status shall start (30) days after
receipt by the bank of the PDIC’s second demand letter.

5. The third demand letter shall be sent to the bank through registered mail and final
demand letter , the PDIC shall terminate the bank’s insured status which shall be
effective after lapse of (30) days.

6. The order of termination shall be final and executory until set aside, modified or
suspended by the PDIC Board of Directors.

7. The corporation shall published the order of termination of the insured status in a
newspaper and/or local circulation for (3) consecutive days. Upon receipt of the
order of termination from corporation, the bank shall give written notice to such
termination to each of the depositors. Failure by the bank to do so shall be subject to
a fine of not exceeding (P1,000) per day or render criminally liable for violation
which is punishable by a fine not more than (P20,000) and by imprisonment of not
more than (5) years.

8. Failure of the bank for whatever reason to give written notice to the depositors shall
not in any way affect the validity and effectivity of the order of termination of
insured status against the depositors of the bank.

9. The insured deposits of each depositor in the bank as of the effective date of
termination, less all subsequent withdrawals/ debit adjustments from any deposits
of such depositor, shall continue to be insured for a period of (90)days from the date
of such termination.

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 10. The bank whose insured status has been terminated shall not advertise nor hold
itself out as having insured deposits unless, in the same connection, the bank shall
state with equal prominence that such additions to the insured deposit and new
deposits made after such termination are not so insured.

11. A bank whose insured status has been terminated ma request for the reinstatement
of its insured status by means of a written application filed with the Corporation.
The PDIC Board of Directors may approve such application based on the
recommendation that: (a) the cause or causes for termination of insured status
has/have been corrected, and (b) that the bank may continue to operate with
insurance cover to its depositors, creditors, and the general public, thereby not
exposing the Deposit Insurance Fund to undue risk.

Payment of Insurance Deposit Claims

The maximum deposit insurance coverage is P500,000 per depositor. All
deposit accounts by a depositor in a closed bank maintained in the same right and
capacity shall be added together. The amount in excess of P100,000 coverage, if the
closed bank is not rehabilitated or taken over by another bank, can still be claimed
upon final liquidation of the remaining assets of the closed bank. The claim may be
filed with the liquidator of the closed bank after filing the claim for insured deposits.

“Always keep your words sweet and soft.

Just in case you need to eat it, you can swallow it well.”
-Oprah Winfrey-

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