Bill increasing depositor insurance gets House OK

THE House of Representatives on Thursday approved on third and final reading a measure empowering the state-run Philippine Deposit Insurance Corp. (PDIC) to increase the maximum deposit insurance coverage (MDIC).

Voting 185-6-1, lawmakers approved House Bill (HB) 8818 grants the PDIC the power to increase the MDIC to amount indexed to inflation or other economic indicators, subject to review and/or adjustment every three years.

The bill will be transmitted to the Senate for its own deliberations.

Currently, the MDIC has stood at only up to P500,000 per depositor per bank.

Under HB 8818, the state-run deposit insurer will become an attached agency of the Bangko Sentral ng Pilipinas.

It also empowers the PDIC to issue rules and establish separate insurance funds and insurance arrangements or structures, taking into consideration the peculiar characteristics of islamic banking and other deposit products as defined by the BSP.

The bill also designates PDIC as statutory receiver of BSP-supervised non-bank instiutions with deposits or products covered by deposit insurance.

The measure restricts the power to conduct bank examination to cases where there is a finding of fraud or unsafe or unsound banking related to deposit taking or a failure of corrective action, such action by PDIC is deemed approriate and necessary by BSP.

It also clarifies the applicability of Repubic Act 7656 or the Dividend Law by defining what constitutes income from other sources.

It also removes from the PDIC the power to issue cease-and-desist orders pertaining to deposit-related unsafe and unsound banking, which power shall be vested with BSP.

House Committee on Banks and Financial Intermediaries Chairman Junie E. Cua, principal author of the proposal, said HB 8818 will also strengthen the regularoty framework of PDIC and to promote and safeguard the interests of the depositing public by providing insurance coverage on all insured deposits and helping maintain a sound and stable banking system.

In explaning his “no” vote, House Deputy Minority Leader and Bayan Muna Rep. Carlos Isagani T. Zarate said the bill only demotes the PDIC to a mere attached agency to the BSP and “yet expands its powers and indirectly amends” the Bank Deposits Secrecy Law.

“Without the presentation of an evaluation report that would warrant a demotion, the proposed bill relegated PDIC as an attached agency to the BSP. Upon the mere determination of the BSP of unsafe, unsound and unlawful banking practices, the BSP bestowed upon itself in the charter of the PDIC, the power to examine and investigate bank records,” Zarate said. “This was an authority exclusive to the PDIC but is already with the BSP.”

While also relegating the PDIC to a mere agency of the BSP, he said it expands PDIC’s authority to examine bank records that are used to be limited to cases due to capital deficiency.

“With the proposed amendment, the examination and investigations shall now include cases where the BSP finds fraud, unsafe or unsound banking,” he said.

“Whenever the BSP deems it appropriate and necessary such as when there is a finding of fraud or unsafe or unsound banking, related to deposit-taking, it will have the power to examine the records, books of accounts and require information and reports from depository institutions,” he added.

Once enacted, Zarate said the confidential nature of bank deposits are no longer effectual.

“Finally, I hope this would not result in the downsizing of employees in the PDIC. It would really be an upsetting situation if the demotion of a financially and administratively autonomous instrumentality would result in the streamlining of human resources, considering that the unemployment rate has been increasing due to the pandemic,” he added.

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