Bukidnon State University

City of Malaybalay
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.

Page | 1
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.

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.

Page | 2
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.

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.

Page | 3
 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.

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.

Page | 4
 “Always keep your words sweet and soft.
Just in case you need to eat it, you can swallow it well.”
-Oprah Winfrey-

Page | 5