The amendments to the charter of the Philippine Deposit and Insurance Corp. (PDIC), signed by President Aquino into law on Wednesday, will give PDIC more power to provide better depositor protection.
The signing of Republic Act 10846, or the deposit-insurance law, gives authority to PDIC to provide enhanced protection to depositors nationwide whose number has reached 50 million as of December 2015.
“The amendments to the deposit-insurance law will ultimately redound to the benefit of the depositing public. The new law will afford depositors better protection, as PDIC may now address risks posed by problem banks early on.
“This will also enable PDIC to perform its role in maintaining financial stability and managing the Deposit Insurance Fund [DIF],” PDIC President Cristina Que Orbeta said.
The law gives PDIC fiscal and administrative authority to oversee problem banks while they are still open. PDIC has the authority to pay insured deposits without netting out depositors’ loan obligations with a closed bank.
The new law also gives PDIC authority to terminate insured status of banks that engage in unsafe and unsound banking practices.
Orbeta said the law strengthened the institutional and governance framework of PDIC to align it with international best practices, apart from helping the agency effectively promote financial inclusion through early intervention in problem banks.
In the event that a bank closes, depositors will have quicker access to their insured deposits, as per the new law. Creditors will also have enhanced chances in their claims against the assets of a closed bank, since the law prevents further dissipation of the assets through transition from bank closure to liquidation.
The new law authorizes PDIC to proceed directly to liquidation, doing away with the 90-day receivership period.
The immediate assignment of assets to 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 will help improve recovery rate for creditors of closed banks.
The newly signed law was authored by Sen. Sergio R. Osmena III, chairman of the Senate Committee on Banks, Financial Institutions and Currencies, and Rep. Nelson P. Collantes, chairman of the House Committee on Banks, Financial Institutions and Currencies.