Phil Deposit Insurance Corp

RA-3591, amended by RA’s 7400, 9302, 9576

(Course Material 1)

PROFESSOR JV ABUEL
LPT MBA CPA JD
 Purpose of the Law
Provides for the creation of PDIC, acting with the basic policy
to promote and safeguard the interest of the depositing
public by way of providing permanent and continuing
insurance coverage of all insured deposits. (Section1 PDIC law)

RA 9576 declared (it) to be the policy of the State to strengthen

the mandatory deposit insurance coverage system to
generate, preserve, maintain faith and confidence in the
country’s banking system, and protect it from illegal schemes
and machinations. (Section 1, RA-9576)
 Insurable Deposit
Deposits of all commercial banks, savings and mortgage
banks, rural banks, private development banks, cooperative
banks, savings and loan associations, as well as branches
and agencies in the Philippines of foreign banks and all
other corporations authorized to perform banking functions
in the Philippines, are insured with PDIC.

Foreign currency deposits are also insured by PDIC.

Depositors may receive payment in the same currency in
which the insured deposit is denominated.
 Compulsory Insurance Deposit

It is obligatory for banks to insure their

deposits with, and pay premiums
thereon to, the PDIC
 Definition of Deposit
Means 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 or thrift account.

BUT NOT: An obligation by the bank payable at an

office outside the Philippine, unless the Philippine
bank seeks specified insurance therefore.
 Insured Deposit

.It is the 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, and includes foreign currency
denominated deposits, but not to exceed
P500,000.00
But which may be adjusted Upward or
Downward: (P500K)
1..In case of a condition that threatens the
monetary and financial stability of the banking
system that may have systemic consequences, as
determined by the Monetary Board:
2.Adjustment shall be in such amount, for such a
period , and/or for such deposits products, as may
be determined by:
a. A unanimous vote of the Board of Directors
b. Chaired by the Secretary of Finance
c. Approved by the President of the Philippines
 Rules in determining Net Amount
Such net amount due to each depositor shall be determined as
follows:
1. There shall be added together all deposits in the bank
maintained in the same right and capacity for his benefit either
in his own name or in the names of others;
2. A joint account regardless of whether the conjunction “and”,
“or”, “and/or”, is used, shall be insured separately for any
individually-owned deposit account;
Provided:
1. If the account is held jointly by two or more natural persons, or by two or
more juridical entities, the maximum insured deposit shall be divided into as
many equals shares as there are individuals, juridical entities, unless a
different sharing is stipulated in the document of the deposit;
Provided continued……
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 entity;

3.The aggregate of the interests of each co-owner over several

joint accounts, whether owned by the same or different
combinations of individuals, juridical entities, shall likewise be
subject to the maximum insured deposit of P500,000.00;

4.No owner/holder of any negotiable certificate of deposits

shall be recognized as a depositor entitled unless his name is
registered as the owner/holder thereof of the books in the
issuing bank.
Not entitled to insurance under PDIC law
Investment products such as bonds securities, trust
and accounts, and other similar instruments;

Deposit accounts or transactions which are unfunded, or that

are fictitious or fraudulent;

Those that constitute or are emanating from unsafe and

unsound banking practices, as determined by PDIC, after due
notice and hearing, and publication of cease and desist order
issued by PDIC against such accounts;

Those proceeding from unlawful activity as defined by the

AMLA law;
 Non-termination of insurance cover
PDIC is mandated not to terminate insured status of any bank
which continues to operate or receive deposits, but with
authority to file appropriate collection suit and impose
administrative sanctions in case of bank’s failure to remit
premiums. (Section 6(h) PDIC law)

Deposit Insurance Fund is created as permanent insurance

fund. ( PDIC v. Court of Appeals 283 SCRA 462 (1997)

Even if the bank instruments provides that certificate is insured by PDIC

does not ipso facto make PDIC liable; deposit liability of PDIC is
determined by RA 3519, and statements in certificates that same are
insured by PDIC are not binding upon the latter.
 Powers of PDIC
Extension of loans & other assistance to banks;
Power to borrow;
Power to secure corrective actions from Monetary Board;
Power of Examination of Banks;
Power to investigate banks for fraud;
Prohibits PDIC officers and personnel;
Power to underwrite and advance
cost of litigation;
Loans and Assistance to
banks
PDIC may provide financial assistance to corporation
acquiring control of, merging or consolidating with, or
acquiring assets of an insured bank in danger of
closing in order to prevent such closure or in order to
allow a closed bank to resume normal operations.

PROVIDED: PDIC cannot use its authority to purchase

voting or common stock of an insured bank but it can
enter into and enforce agreements that it determines to
be necessary to protects its financial interests.
 “Systemic Risks”
1. To possibility that failure of one bank to settle net
transactions with other banks will trigger a chain
reaction, depriving the other banks of funds leading
to a general shutdown of normal clearing and
settlement activity;
2. Likelihood of a sudden, unexpected collapse of
confidence in a significant portion of banking or
financial system with potentially large real economics
effects.
PDIC v. COA 546 SCRA 473 (2008) “authority to condone”
 Power to Borrow
For purposes of meeting its insurance purposes and its financial assistance
functions, PDIC is authorized to:
1. Borrow from BSP and BSP is authorized to lend to PDIC; Section 18
2. Obtains loans or arrange credit lines and other credit accommodations
from any bank designated as depositary or fiscal agent of the
Philippine Government; Section 18
3. With the approval of the President, issue bonds, debentures and other
obligations, both local and foreign, as maybe necessary for purposes
of providing liquidity for settlement of insured deposits in closed banks
as well as for financial assistance, which shall be exempt from taxation
both as to principal and interest and fully guaranteed by the
government, which guarantee shall not exceed two times the Deposit
Insurance Fund. Section 19, RA 9567
Secure corrective actions from MB

Or institute itself such corrective actions in court, when

its examinations shows that the bank or its offices are
committing unsafe or unsound practices or have violated
any law or provision. Section 7(1)

HOWEVER: Allowed to become Director or Officer when

part of the terms of financing assistance extended by PDIC.
Section 9
 Power of examination of books
With prior approval of MB: Section 9

1. No examination can be conducted within 12 months from the last

examination date;
2. PDIC ( by affirmative vote of the majority of the Board) in coordination with
BSP, conducts a special examination of a bank that is threatened or
impending closure;
3. Notwithstanding the Secrecy of Bank Deposit Act, PDIC and/or BSP may
inquire into or examine deposit accounts and all information related
thereto in case there is a finding of unsafe or unsound banking practice.

To avoid overlapping efforts, the examination shall maximize the efficient

use of the relevant reports, information, and findings of the BSP made
available to PDIC.
Power to investigate banks for frauds

Investigate banks for frauds, irregularities and

anomalies committed, provided that appoint of
investigators approved by the PDIC Board (and
without need of prior Monetary Board approval);
Prohibits PDIC officers and personnel..

Prohibit officers and personnel from being

officers, consultants, employee or stockholders,
directly or indirectly, of any bank, nor to
receive gifts from banks or divulge information
relating to the business or conditions of banks;
Section 9
Underwrite and Advance Costs of Litigation

In all actions filed by PDIC as receiver, payment of

courts fees shall be deferred until action is
terminated with finality, and such fees shall
constitute as first lien on any judgement in favor of
closed banks, or in case of unfavorable judgment,
to be considered as administrative expenses. Section
11
Priority as to appointment as receiver

Effective upon PDIC takeover as receiver, the power,

functions and duties, as well as allowances,
remunerations and perquisites of the directors, officers
and stockholders, as well as relevant provisions of the
articles and by-laws, are immediately suspended.

Manalo v. court of Appeals, 366 SCRA 752 (2001)

Section 29 applies only in cases where there are claims
against an insolvent bank…..
Subrogation Rights

Right to be subrogated to all rights of the depositor

against a closed bank to the extent of payment made
by the PDIC. Section 15(d)

If depositor in a closed bank fails to file a claim for his

insured deposits within 2 years after Monetary Board shall
have ordered bank’s closure, all rights of depositor against
PDIC shall be barred. Section 15(e)
Prohibitions on TRO, PI, PMI
Courts prohibited (except CA) from issuing any TRO, Preliminary
Injunction, Preliminary Mandatory Injunction against PDIC, for
any action under the PDIC law.

SC may issue a restraining order or injunction when the matter

is of extreme urgency involving a constitutional issue.

Any TRO or injunction issued in violation of prohibition is void

and of no force and effect, and any judge who has issued
same shall suffer penalty of suspension of at least 60 days
without pay. Section 22
Tax Exempted

PDIC eventually exempted from income tax, final

withholding tax, value-added tax on assessment
collected from member banks, and local taxes.
Section 17, PDIC, as amended by RA 9576
 Requirements in Filing Claims

1. Original evidence of deposits such as savings passbook, certificate of

time deposit, bank statement, unused checks, and ATM card.
2. Original copy of (1) valid photo bearing identification documents (ID)
with clear signature of depositor/claimant such as Driver’s License,
SSS/GSIS, Senior Citizen’s ID, Passport, PRC ID, OWWA/OFW ID,
Seaman’s
ID, Alien Certification of Registration ID, Voter’s ID, IBP.
3. If the depositors is below 18 years old, a photocopy of his/her birth
certificate from PSA or duly certified copy from the local civil registrar,
and valid ID’s of the parent.
4. Original copy of a notarized SPA for claimants who are not the
signatories in the bank records. In the case of minor depositor, the SPA
must be executed by the parent
 PDIC Functions

1. Insurance
2. Examination
3. Bank Rehabilitation
4. Receivership of Closed banks
5. Liquidation of Closed banks
Insurance Function

Compulsory insurance on all bank deposits. The net amount to any depositor for
deposits in an insured bank, after deducting any offsets, but should not exceed
P500,000. (RA 3591 as amended by RA 9576, April 29, 2009)

If the depositor has two (2) or more accounts with the same bank, the maximum
coverage pertains to the sum of all such accounts ,maintained in the right and
capacity.(Section 4(g))

In the determining such amount due to any depositor, there shall be added together 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. (Section 4(g))

Foreign currency deposits are covered under the provisions of RA 3591, as amended
and insurance payment shall be in the same currency in which the insured deposits are
denominated. (Section 9, RA 6426, Circular No.1389, 1993)

The PDIC law is not applicable to Offshore Banking Units. (PD 1034).
Bank Examination Function

PDIC authority to examine its member banks, with prior approval by the Monetary
Board, has been restored.

Bank Rehabilitation Function (Section 17(c))

The PDIC, in the discretion of its Board of Directors, may grant financial assistance to
distressed banks if it is proven to be a less costly alternative than closure or determine
that the actual payoff and liquidation thereof will be more expensive than the
exercise of that power, when in the opinion of the Board of Directors, the continued
operation of such bank is essential to provide adequate banking service in the
community or maintain financial stability in the economy.
Receivership of Closed Bank

Once a bank is ordered closed by the Monetary Board of th BSP, the PDIC is
designated as statutory receiver. The PDIC upon receipt of the MB resolution ordering
the closure of a bank, immediately physically takes over the closed bank.
Receivership is the stage within which the PDIC manages the affairs of the closed
bank and preserve its assets for the benefits of creditors. (Section 10 (a,b))

Liquidation of Closed Bank Function (Section 17(c))

After it is determined that the closed bank cannot be rehabilitated, the PDIC shall
recommend the liquidation of the assets of the closed bank. Liquidation refers to the
recovery and conversion of assets into cash for distribution to all creditors in
accordance with the order of creditor preference pursuant to law.
Composition of Board of Directors

Secretary of Finance, ex-officio Chairman of the Board

without compensation

Governor of the BSP;

President of the PDIC, who shall be appointed by the

President of the Philippines to serve on full-time basis for a
term of six (6). He shall also be the vice-chairman of the
Board;

Two (2) members from the private sector, to be appointed

by the President of the Philippines for a term of six (6) years
without reappointment.
Cases:

PDIC vs. Gidwani, GR no. 234616, June 20, 2016

PDIC vs. Court of Appeals, 283 SCRA 462 (1997)
PDIC vs Commission on Audit , 546 SCRA 473 (2008)
Manalo vs Court of Appeals, 366 SCRA 752 (2001)
 PDIC vs. Gidwani, GR no. 234616, June 20, 2016

Under RA 3591, all deposits in a bank maintain in the same right

and capacity for a depositor’s benefit, either in his name or in the
name of others, shall be added together for the purpose of
determining the insured deposit amount due to a bona fide
depositor, which amount should not exceed the maximum
deposit insurance coverage (MDC) of P250,000 (now under RA
10846, P500,000). Thus, the entitlement to a deposit insurance is
based not on the number of bank accounts held, but on the
number of beneficial owners.
 PDIC vs. Court of Appeals, 283 SCRA 462 (1997) GR.No.118917

Even if the bank instruments provides that certificate is insured by PDIC

does not ipso facto make PDIC liable, deposit liability of PDIC is
determined by RA 3519, and statements in certificates that same are
insured by PDIC are not binding upon the latter.

In order for a claim for deposit insurance with PDIC to prosper, Law
requires that corresponding deposit be placed in insured bank; deposit as
defined under Section 3(f) of Law may be constituted only if money or
equivalent of money is received by bank. When evidence shows that
certificates of time deposit were issued in consideration of checks
received by the issuing bank, which checks bounced, issuing bank
received no money therefor, no deposit therefore came into existence,
and PDIC cannot be held liable for value thereof.
PDIC vs Commission on Audit , 546 SCRA 473 (2/22/2008)
GR No.171548

The authority of PDIC to condone under its charter is

circumscribed by the phrase “to protect the interest of the
Corporation,” applies only to ordinary receivables,
penalties and surcharges and must be submitted to the
COA before it is implemented, does not include the
power to condone liability that arises from a violation of
law.
Manalo vs Court of Appeals, 366 SCRA 752 GR No.141297(10/08/2001)

Section 29 of PDIC law applies only in cases where there are claims against an
insolvent bank, and that the exclusive jurisdiction of the liquidation court
pertains only to the adjudication of claims against the bank and does not cover
the reverse situation where it is the bank which files a claim against another
person or legal entity.

Requirement under Section 29 that all claims against bank be pursued in the
liquidation proceedings filed by the Central Bank is intended to prevent
multiplicity of actions against the insolvent bank and designed to establish due
process and orderliness in the liquidation of the bank, to obviate the
proliferation of litigations and to avoid injustice and arbitrariness. Legislature
contemplated that for convenience, only one court, if possible, should pass
upon claims against insolvent bank and that liquidation court should assist
Superintendents of Banks and regulate his operations.
Thank You