By Luz Wendy T. Noble, Reporter
TOP BANKING GROUPS expressed support for the proposed legislation that would introduce changes to the Philippine Deposit Insurance Corp. (PDIC) charter, including a regular review of the maximum deposit insurance coverage for account holders.
In an e-mail, the Bankers Association of the Philippines (BAP) said it believes that the maximum deposit insurance “must be indexed to inflation and that the PDIC board must be allowed to make timely adjustments to this amount.”
The BAP’s position is in line with the provisions of Senate Bill (SB) 2365 and House Bill (HB) 8818. Both bills would require the PDIC board of directors to review the maximum deposit insurance coverage every three years and allow them to increase the coverage based on inflation and other economic indicators that may be relevant.
To fulfill this mandate, the PDIC board will be allowed to get the service of independent actuarial consultants and other experts to consider the feasibility and sustainability of a higher maximum deposit insurance coverage.
At present, the PDIC provides a maximum deposit insurance coverage of P500,000 per depositor for each bank.
The maximum deposit insurance coverage was last increased to P500,000 from P250,000 in April 2009, as part of efforts to boost depositors’ confidence amid the global financial crisis.
“An increase to the maximum deposit insurance must provide a balance between the PDIC’s sustainability and rationalizing the financial costs banks are incurring,” BAP said.
The House of Representatives passed HB 8818 in March, while SB 2365 is still pending at the Senate committee level.
The Chamber of Thrift Banks (CTB) also backed the proposal to raise the maximum deposit insurance coverage for depositors, but want assurance that the assessment rate under the original PDIC charter will be retained.
CTB Executive Director Suzanne I. Felix is referring to the contribution of PDIC member banks to the Deposit Insurance Fund (DIF), which is the source of the agency’s deposit insurance payouts.
This fund allows the PDIC to pay deposit insurance claims to depositors within a set turnaround time in cases of bank closures.
Member banks are assessed the annual flat rate of 1/5 of 1% of their total deposit liabilities. The assessments are collected semi-annually and form part of the DIF. This fund is managed through prudent investments as mandated by the PDIC charter.
“Increase in coverage will create stability for the banking system as this will boost public confidence/trust in the banking sector,” Ms. Felix said in an e-mail.
“However, banks are adversely affected by the pandemic, particularly their loan portfolios, hence cannot afford any increase in premium. Thrift banks, in particular, need to address the requirements of their MSME (micro-, small-, and medium-sized enterprises) clients who have also been severely affected by the crisis,” she added.
Also, Ms. Felix said the group supported the proposal for PDIC to become an attached agency of the Bangko Sentral ng Pilipinas (BSP) “for policy program and coordination.”
PDIC is currently an attached agency of the Department of Finance.
In a statement last week, the BSP said making PDIC an attached agency of the central bank is in line with recommendations of the International Monetary Fund. It said this move is expected to “enhance synergy among BSP, PDIC and other domestic financial regulators in promoting the country’s financial stability.”