Philippine Deposit Insurance Corporation Act (PDIC)

RA 3591, as amended by RA 10846

Basic policy:
The PDIC shall, as a basic policy of the state to strengthen the mandatory deposit insurance system
to generate, preserve, maintain faith and confidence in the country’s banking system, and protect it
from illegal schemes and machinations. (Sec. 2)

Composition of the Board of Directors

1. The Secretary of Finance who shall be the ex-oficio Chairman of the Board without
compensation;
2. The Governor of the BSP who shall be ex-officio member of the Board without
compensation;
3. The President of the Corporation, who shall be appointed by the President of the Philippines
to serve on a full-time basis for a term of six years. The President of the Corporation shall
also serve as Vice Chairman of the Board; and
4. Four member from the private sector to be appointed by the President of the Philippines.

- The appointive directors shall serve for a term of six years unless sooner removed for cause
and shall be subject to only one reappointment. Provided, that of those first appointed, the
first 2 appointees shall serve for a period of 3 years; Provided, however, that the appointive
director shall continue to hold office until the successor is appointed.

- The presence of four members shall constitute a quorum. All decisions of the Board of
Directors shall require the concurrence of at least four members. (Sec. 3)

Deposit
- The unpaid balance of money or its equivalent received by a bank in the usual course of
business and for which it has given or is obliged to give credit to a commercial, checking,
savings, time of thrift account, evidenced by a passbook, certificate of deposit, or other form
of deposit issued in accordance with BSP rules and regulations and applicable laws,
together with such other obligations of a bank, which, consistent with banking usage and
practices, the Board of Directors shall determine and prescribe by regulations to be deposit
liabilities of the bank. (Sec. 5, g)

Note: PDIC law insures your deposits only when the bank closes. Pa gang bangko nanakawan,
bank robbery, hindi PDIC ang magbabayad dyan. Ang mga bangko meron din yang mga insurance
against robbery or theft. In the same manner, kapag nasunog yung pera mo, hindi rin PDIC ang
magbabayad dyan. Ang kinocover ng PDIC ay loss of money because of bank closure, nalugi,
nagsara, nag bank holiday.

- Any obligation of a bank which is payable at the office of the bank located outside of the
Philippines shall not be a deposit for the purposes of the total deposits or of insured deposit:
Provided, further that subject to the approval of the Board of Directors, any insured bank
which is incorporated in the Philippines which maintains a branch outside the Philippines
may elect to include for insurance its deposit obligations payable only at such branch. (Sec.
5, g)

Note: Bakit “elect”? Kasi when you are a bank you want your deposits to be insured you will pay
premium with the PDIC. So generally yung mga banks in the Philippines, they paid premium for their
branches here, para pag nagsara mababayaran. Pag outside, as a general rule, hindi siya covered
pero pwede nilang i-elect to include para maging covered.
Insured Deposit
- The amount due to any bona fide depositor for legitimate deposits in an insured bank as of
the date of closure, but not to exceed Php500,000.00. In determining such amount due to
any depositor there shall be added together all the deposits in the bank maintained in the
same right and capacity for his or her own name or in the name of others. (Sec. 5)

Note: Remember the Php500,000 but it has to be in the same right, same capacity or same name.

Single account – meron yang “by”, “ITF”, and “FAO”.

 “By” account example: Anna by Ben (Ang depositor/principal si Anna;
agent si Ben)
 “In Trust For” account example: Anna in trust for Ben (Ang depositor
si Ben)
 “For the Account Of” account example: Anna for the account of Ben
(Depositor si Ben)

Halimbawa merong Ben – Savings Account, Ben – Checking Account, Anna in trust for Ben, PDIC
will consider everything.

Example ulit.
1. Si Ben, ang deposit niya is 100,000; how much is the insured deposit? 100,000.
2. Anna for the account of Ben, ang deposit is 100,000; another 100,000 insured deposit.
3. Charlie in trust for Ben, 100,000; another 100,000 insured deposit.
4. Ben’s store, ang deposit niya 1M; remember meron na siyang 300,000 covered above, dito
sa Ben’s Store, 200,000 na lang ang covered.
- Why? Because ang maximum amount is only 500,000.

Joint Account
- An account in the name of two or more persons. It is indicated by the words “and/or”
(survivorship account, each can withdraw on his own) and “and” (all depositors required to
sign withdrawal slip).

Note: Example, Anna and Ben; Anna or Ben; Anna and/or Ben. Ang maganda dito, parang may
corresponding share siya depending on the number of people involved.

-A joint account regardless of whether the conjunction “and”, “or”, “and/or” is used, shall be insured
separately from any individually-owned deposit account provided that:

a. If 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

Note: Example, unang joint account ni Ben, Anna or Ben, ang deposit is 500,000; how much is the
insured deposit of Ben? 250,000. Because the law says kapag joint account, pro rata.

Kung yung second joint account ni Ben, Anna and Ben, ang deposit 1M; how much is the insured
deposit of Ben? 250,000. Because of the 500,000 cap.

Kung yung pangatlo, Anna and/or Ben, 1M ang deposit; how much is the insured deposit of Ben?
Wala na.
 b. 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 entity; provided further that the aggregate of the interest of each co-
owner over several joint accounts, whether owner by the same or different combinations
of individuals, juridical persons or entities, shall likewise be subject to the maximum
insured deposit of Php500,000. (Sec. 5,j)

Note: Example, Anna and Ben Corp., ang presumption is it will belong entirely to the juridical
person.

Another example, kunwari dalawa ang deposit ni Ben sa bangko. Yung isa all single account for Ben
amounting to 1M, magkano ang insured deposit? 500,000.

In the same bank, merong joint account si Ben, ang deposit 3M. Magkano ang insured deposit?
500,000.

Ang total na marerecover niya 1M. Why? Because the law says in one right and in one capacity.
Yung una, in his own right as a single depositor; yung second, as a co-owner of a joint account.
Hindi magkasama yun.

Maximum Indemnity
- Php500,000 per person per bank in the Philippines, whether in Philippines or foreign
currency.
- If it is a foreign currency deposit unit, indemnity amount in pesos on the day the bank is
ordered closed.

Deposit accounts not entitled to payment

1. Investment products such as bonds and securities, trust accounts, and other similar
instruments;
2. Deposit accounts or transactions which are fictitious or fraudulent as determined by the
PDIC;
3. Deposit accounts or transactions constituting, and/or emanating from unsafe and unsound
banking practice/s as determined by the PDIC in consultation with the BSP, after due notice
and hearing, and publication of a directive to cease and desist issued by the PDIC against
such deposit accounts, transactions or practices;
4. Deposits that are determined to be the proceeds of an unlawful activity as defined in RA No.
9160, as amended. (Sec. 5, g, 2nd par.)

Note: No right can arise in an illegal transaction.

Liquidation of a closed bank

- Whenever a bank is ordered closed by the MB, the PDIC shall be designated as receiver and
it shall proceed with the takeover and liquidation of the closed bank. For this purpose, banks
closed by the MB shall no longer be rehabilitated. (Sec. 12)

Closed banks under PDIC

1. Closed by the MB pursuant to Sec. 30 of RA 7653; or
2. Upon expiration or revocation of a bank’s corporate term. (Sec. 19)

Mode of payment
 - Payment of the insured deposits on such closed bank shall be made by the corporation as
soon as possible either:
a. By cash; or
b. By making available to each depositor a transferred deposit in another insured
bank in an amount equal to insured deposit of such depositor.

- Provided, however, that the corporation, in its discretion, may require proof of claims to be
filed before paying the insured deposits, and that in any case where the corporation is not
satisfied as to the validity of a claim for an insured deposit, it may require final determination
of a court of competent jurisdiction before paying such claim. (Sec. 19)

Failure to claim of insured depositor

- 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 the corporation
responsible for the delay, to imprisonment from six months to one year: Provided,
furthermore, 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 including the case mentioned
in the first proviso or by the corporation together with such other office, body, or agency.
(Sec. 19)

Effect of payment of insured deposit

- The PDIC, upon payment of any depositor as provided for in Sec. 19 of this Act, 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 the 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: Provided, that such depositor shall retain his or her claim for any
uninsured portion of his or her deposit, which legal preference shall be the same as that of
the subrogated claim of the PDIC for its payment of insured deposits.

Note: Halimbawa 1M yung deposit, 500,000 lang yung babayaran ng PDIC, yung sobra, as a
depositor, may claim ka pa rin dun sa bangko.

- All payments by the PDIC of insured deposits in closed banks partake of the nature of public
funds, and as such, must be considered a preferred credit in the order of preference under
Art. 2244(9) of the New Civil Code. (Sec. 20)

Failure of depositor to claim insured deposits

- Unless otherwise waived by the PDIC, if the depositor of a closed bank shall fail to claim his
insured deposit with the PDIC within two years from actual takeover of the closed bank by
the receiver or does not enforce his claims filed with the PDIC after the two year period to file
a claim, all rights of the depositor against the PDIC with respect to the insured deposit shall
be barred. (Sec. 21)

Splitting of deposits
- Occurs whenever a deposit account with an outstanding balance of more than the statutory
maximum amount of insured deposit maintained under the name of natural or juridical
persons is broken down or transferred into two or more accounts in the name/s of natural or
juridical persons or entities who have no beneficial ownership on transferred deposits in their
names within 120 days immediately preceding or during a bank declared holiday, or
 immediately preceding a closure ordered by the MB of the BSP for the purpose of availing of
the maximum deposit insurance coverage.

Prohibition against issuances of temporary restraining orders

- No court, except the Court of Appeals, shall issue any temporary restraining order,
preliminary injunction or preliminary mandatory injunction against the corporation for any
action under this Act.

- This prohibition shall apply in all cases, disputes, or controversies instituted by a private
party, the insured bank, or any shareholder of the insured bank.

- The Supreme Court may issue a restraining order or injunction when the matter is of extreme
urgency involving a constitutional issue, such that unless the temporary restraining order is
issued, grave injustice and irreparable injury will arise. The party applying for the issuance of
a restraining order or injunction shall file a bond in an amount to be fixed by the SC, which
bond shall accrue in favor of the PDIC, if the Court should finally decide that the applicant
was not entitled to the relief sought.

- Any restraining order or injunction issued in violation of this Section is void and of no force
and effect and any judge who has issued the same shall suffer the penalty of suspension of
at least 60 days without pay. (Sec. 27)

Question:

When Occidental bank folded up due to insolvency, Rodrigo had the following separate deposits in
his name: 200,000 in savings deposit; 250,000 in time deposit; 50,000 in current account; 1M in a
trust account and 3M in money market placement. Under the PDIC Act, how much could Rodrigo
recover?

Answer:
Rodrigo can recover 500,000 because this is the total of his savings deposit, time deposit and
current account. The trust account and the money market placements are not included in the insured
deposits.