Philippine Deposit Insurance Corporation (PDIC)
CA 1998
Basic policy
• Promote and safeguard the interest of the depositing public by way
of providing permanent and continuing insurance coverage on all
insure deposits.
Concept of insured deposits
1. The term “Insured deposits” means 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 the
closure but not to exceed P 500,000.
2. The term “deposit” means the unpaid balance of money or
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 or which is evidenced by
passbook, check and/or certificate of deposit printed or issued in
accordance with Central bank rules and regulations and other
applicable laws, together with such other obligations of a bank which,
consistent with banking usage and practices, the board of directors shall
determine and prescribe by regulations to be deposit liabilities of the
Bank. PDIC vs. CA 1998
Liability to depositors
1. PDIC can only be liable if
a. the insured bank actually receives deposit and
b. the bank is ordered closed by BSP.
2. Where no deposit (as defined in Section 3(f) of Republic Act No.
3591) came into existence, PDIC cannot be held liable for the value
of time deposit certificates.
The LIABILITY of PDIC for insured deposits is STATUTORY and under
RA 3591, as amended, such liability RESTS UPON THE EXISTENCE
with the insured bank, NOT on the negotiability or non-
negotiability of the certificates evidencing these deposits. PDIC vs.
Deposit liabilities required to be insured with PDIC
1. The term “ 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.
2. The deposit must give rise to creditor-debtor relationship
between the bank and the depositor.
3. Deposits in a branch of domestic bank outside the Philippines shall
not be covered unless the insured bank elects to include the same for
insurance subject to approval of the PDIC.
Commencement of liability
1. PDIC shall commence the determination of insured deposits due to
the depositors of the closed bank upon its ACTUAL take-over of the
closed bank.
2. Under its charter (RA 3591), PDIC is liable only for deposits
received by a bank “in the usual course of business”. Even though a
bank was prohibited by CB from doing further business on the ground of
insolvency, the bank and its clients could be given the benefit of the
doubt that they were not aware that the Monetary Board resolution
had been passed, given the necessity of confidentiality of placing a
banking institution under receivership. If on the next banking day
following the issuance of the Monetary Board Resolution, the epositor
PRE-TERMINATED his time deposits and RE-DEPOSITED the funds
into smaller denominations; said deposits were STILL for a
consideration and COVERED by the PDIC insurance coverage. PDIC
vs. CA (2003)
Deposit accounts not entitled to payment
*PDIC shall not pay deposit insurance for the following accounts or
transactions whether denominated, documented, recorded or booked
as deposit by the bank;
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 1. investment products such as bonds and securities, trust
accounts, and other similar instruments;
2. deposit accounts or transactions which are unfunded, or that
are fictitious or fraudulent;
3. deposit accounts or transactions constituting unsafe and
unsound banking practices as determined by PDIC, in
consultation with BSP, after
• a. due notice and hearing, and
• b. publication of a cease and desist order issued by
the PDIC against such deposit accounts or
transactions; and
4. deposits that are determined to be the proceeds of an
unlawful activity as defined under the Anti-Money
Laundering law
Extent of liability Determination of insured deposits; Calculation
of liability; per depositor, per capacity rule; joint accounts
1. Deduct any loan of the depositor from the deposit with the insured
bank to determine net insured deposit
2. Individually owned deposit account is insured separately from joint
accounts regardless of whether the conjunction “ and “, “ or “ , “ and/or
“ is issued. In determining such amount due to the 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.
3. if the account is held jointly by two or more natural persons or
two or more juridical entities, the maximum insured deposit shall be
divided into as many equal shares as there are many individuals or
juridical entities, unless a different sharing is stipulated in the deposit
document.
4. If the account is held by a juridical person jointly with a natural
person, the maximum insured deposit shall be presumed to belong
entirely to the juridical person.
5. The aggregate of the interests of each co-owner over several joint
accounts, whether owned by the same or different combination of
individuals, juridical persons or entities shall likewise be subject to
the maximum insured deposit of P500,000.
Mode of payment
• Whenever an insured bank shall have been closed by the MB,
payment of the insured deposits shall be made by PDIC as soon as
possible either by
• 1) cash or
• 2) making available to each depositor a transferred deposit
in another insured bank in an amount equal to insured
deposit of such depositor, subject to submission of proof of
claims.
Effect of payment of insured deposits
• PDIC, upon the payment of any depositor, shall be subrogated to all
the rights of the depositor against the closed bank to the extent of such
payment.
• Subrogation shall include the right on the part of PDIC to receive
the same dividends from the proceeds of the assets of such closed
bank and recoveries on account of stockholders’ equity as would
have been payable to the depositor on a claim for the insured deposit
• but such depositor shall retain his claim for any uninsured
portion of his deposit.
Failure to settle claim of insured depositor
• The failure to settle the claim within six months from date of filing of
the claim for insured deposit whether such failure was due to grave
abuse of discretion, gross negligence, bad faith or malice shall, upon
conviction, • subject the directors, officers or employees of PDIC
responsible for the delay, to mprisonment from six months to one
year;
• provided that the period shall not apply if the validity of the claim
requires the resolution
of issues of facts and/or law by PDIC or another office, subject further
to the remedy of PDIC to require final determination of a court of
competent jurisdiction if PDIC is not satisfied as to the viability of the
claim for insured deposit.
Failure of depositor to claim insured deposits
• Unless otherwise waived by PDIC, if the depositor in the closed bank
shall fail to claim his insured deposit with PDIC within two years from
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actual take over of the closed bank by the receiver or does not enforce
his claim filed with PDIC within two years after the two year period to
file a claim, all rights of the depositor against the PDIC with respect to
the insured deposit shall be barred;
• however, all rights of the depositor against the closed bank and its
shareholders or the receivership estate to which the PDIC may have
become subrogated shall thereupon revert to the depositor.
Examination of banks and deposit accounts
• PDIC may conduct examination of banks with prior approval of the
MB
• provided that no examination can be conducted within 12 months
from the last examination date;
• provided however that PDIC may, in coordination with BSP conduct a
special examination if there is a threatened or impending closure
of a bank.
• Notwithstanding RA 1405, RA 8791, RA 6426 and other laws, PDIC
and/or BSP may inquire into or examine deposit accounts and all
information related thereto in case there is a finding of unsafe and
unsound banking practice**
injunction against PDIC for any action on its part under the PDIC
charter.
• The Supreme Court may issue a temporary restraining order or
injunction when the matter is of extreme urgency involving a
constitutional issues such that unless a TRO is issued, grave injustice
or irreparable injury will arise.
• GR: The actions of PDIC with respect to determination of insured
deposit accounts shall be final and executory and may not be set
aside or restrained by the court
• XPN: except on petition for certiorari on the ground that the action
was taken in excess of jurisdiction or with grave abuse of discretion
as to amount to lack or excess of jurisdiction.
• The petition for certiorari may only be filed within 30 days from
notice of denial of claim for deposit insurance.

Prohibition against splitting of deposits

• Splitting of deposits occurs whenever a deposit account with an
outstanding balance of more than the statutory maximum amount of
insured deposit maintained under the name of natural or juridical
persons is
• broken down and transferred into two or more accounts in the
name/s of natural or juridical persons or entities who have no
beneficial ownership on transferred deposits in their names
• within 120 days immediately preceding or during a bank
declared holiday or immediately preceding a closure order by the
BSP
• for the purpose of availing of the maximum deposit insurance
coverage.
• Such splitting of deposit is punishable by imprisonment and/or fine.
Prohibition against issuance of TRO
• No court, except the Court of Appeals, shall issue any temporary
restraining order, preliminary injunction or preliminary mandatory

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 corresponding to the same, he is entitled to recover only up to P10,000.00 in
case of closure and liquidation of the bank. (BAR 1977)

3. When Oriental Bank was ordered close by Central Bank on May 15, 1985,
Elizabeth Diaz had 3 separate deposit accounts in her name with the same
1. X, a bank depositor has a P15,000 savings deposit and a P20,000 time deposit
bank, namely: P200,000 in time deposit; P100,000 in current deposit; and
with a bank. If the bank becomes insolvent, and is closed by the Government,
P50,000 in savings deposit. Under the PDIC law, how much, if any, could she
how much if any, is the guaranteed amount he can obtain as a
recover from each of the 3 separate accounts? Explain.
matter of right for the two accounts? Explain.
Answer:
Answer:
Under the PDIC law, Elizabeth Diaz, although having 3 separate deposit
He can only obtain P10,000 as a matter of right, by way of guarantee. Under the
accounts in her name, totaling P350,000, in the Oriental Bank which was
Philippine Deposit Insurance Act, the maximum amount covered by insurance
ordered close by the Central Bank, can recover only the aggregate amount of
is P10,000. And by express provision of law, this includes all kinds of deposits
P40,000 because the maximum amount of the insured deposit of any depositor,
—savings current as well as time deposits—in the name of or for the benefit of
not for every account of a depositor in the bank, is only P40,000.
one person. (BAR 1975)
Note: Section 4 (g) of RA No. 9302 provides that the term “insured deposits”
Note: The term “insured deposits” means the amount due to any bona fide
means the amount due to any bona fide depositor for legitimate deposits in an
depositor for legitimate deposits in an insured bank net of any obligation of the
insured bank net of any obligation of the depositor to the insured bank as of the
depositor to the insured bank as of the date of the closure but not to exceed
date of the closure but not to exceed P500,000.00. (BAR 1985)
P500,000. (Sec.4 (g), RA 9302)
4. An employee of a large manufacturing firm earns a salary which is just a bit
2. The Deposit Insurance Law insures deposits up to P10,000.00 per depositor.
more than what he need for a comfortable living. He is thus able to still
X has three separate deposits in a single bank, namely, P15,000.00—Savings
maintain a P10,000 savings account, a P20,000 checking account, a P30,000
Deposit; P15,000.00—Current Deposit (checking account). Later on, the bank
money market placement and a P40,000 trust fund in a medium-size
ran into financial trouble and was ordered by the Central Bank to close and
commercial bank.
liquidate. How much may X recover? Answer with reasons.
State which of the four accounts are deemed insured by the PDIC?
Answer:
Answer:
X may recover only up to P10,000.00. According to Sec. 3(f) of the Deposit
The P10,000 savings account and the P20,000 checking account are deemed
Insurance Corporation Act the term “deposit” means the unpaid balance of
insured by the PDIC. (BAR 1997)
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,
5. When OCCIDENTAL Bank folded up to insolvency, Manuel had the following
savings, time or thrift account or which is evidenced by its certificate of deposit,
separate deposits in his name; P200,000 in savings deposit; P250,000 in time
and trust funds held by such bank x x x. “The fact therefore that X has savings,
deposit; P50,000 in a current account; P1 M in a trust account; and P3 M in
time, and current deposits in the same bank is immaterial. They all came under
money market placement. Under the PDIC Act, how much could Manuel
the same heading of deposit”
recover?
In Sec. 3(g) of the same Act, the term “insured deposit” is defined as the net
Answer:
amount due to any depositor for deposits in an insured bank (after deducting
Manuel can recover P500,000 because this is the total of his savings deposit,
offset) less any part thereof of which is in excess of P10,000.00 x x x.” Likewise,
time deposit and current account. The trust account and the money market
Sec. 10(a) thereof, insofar as pertinent provides: “That the maximum amount of
placements are not included in the insured deposits. (BAR 2010)
the insured deposit of any depositor shall be P10,000.00”. Evidently,
irrespective of kinds of deposits of a particular depositor and the total amount

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6. X is a depositor of AAA Bank. She has 3 deposit accounts all under her name.
One, in checking account, one in saving account and another one in time deposit
account. Each account has a balance of P250,000. AAA Bank became insolvent.
PDIC closed the Bank. X therefore is unable to withdraw from all of the
accounts. She then filed her claims with the PDIC. Which statement is most
accurate?
Answer:
a) X can claim a total of P500,000 for all 3 accounts. (BAR 2012)