Pending Bills Push for Enhanced Depositor Protection
11 August 2015– Proposed measures to benefit the depositing public affected by bank closures are being pursued in Congress.
Rep. Nelson P. Collantes, Chairman of the Committee on Banks and Financial Intermediaries of the House of Representatives, and Sen. Sergio R. Osmeña III, Chairman of the Senate Committee on Banks, Financial Institutions and Currencies,authored House Bill No. 4392 and Senate Bill No. 2268, respectively, to amend the Charter of the Philippine Deposit Insurance Corporation (PDIC). The bills are intended to institutionalize much-needed reform measures in the field of deposit insurance, bank resolution and receivership and liquidation of banks.
The proposed amendments will enable PDIC to more effectively provide protection to the depositing public via more expeditious payment to depositors of their deposit insurance claims, safeguard the banking system from disruptions resulting from bank failures, and promote financial inclusion to the unbanked areas. The bills also aim to facilitate the liquidation process for banks that are inevitably closed by the Monetary Board. This is to preserve the value of whatever is left of the assets of the closed bank and thereby enhance the recovery of creditors from the banks’ assets.
Drawing lessons from the experience of deposit insurers worldwide, the proposed amendments to the PDIC Charter will put PDIC at par with international standards in ensuring an effective deposit insurance system. To allow the immediate reimbursement of depositors of their insured deposits, the bills will authorize PDIC to accept evidence of deposit (i.e., passbook, certificate of time deposit, ATM card) as additional proof of deposits instead of relying exclusively on records of the closed bank.
Another proposed amendment is to allow the gross settlement of deposit insurance claim of depositors who are also borrowers of the closed banks. Instead of netting out their payables from their insured deposits, depositors have the option to settle their obligations directly with the closed banks, and get their deposit insurance entitlement in full.
The proposed measures also elevate the status of claims of depositors with uninsured deposits, i.e., those with deposits in excess of the maximum deposit insurance of P500,000. Uninsured depositors will thus improve their chances of recovery from the assets of closed banks, since their claims will be settled ahead of other ordinary creditors. The proposals are likewise intended to further boost depositor confidence in the banking system and promote financial inclusion.
Senate President Franklin Drilon previously announced that Senate Bill No. 2268, authored by Sen. Osmena, has been identified as a priority measure of the Senate on this last session of the 16th Congress. In a gathering of the Makati Business Club’s general membership on August 6, 2015, Senate President Drilon vowed to pass the amendments to the PDIC bill for a more effective recovery against assets of closed banks.
