Philippine Deposit Insurance Corporation (PDIC) Act (RA 3591, As Amended) and

Maximum Deposit Insurance (RA 9576)

1) CONCEPTS & IDEA

1.1) Introduction

The Philippines Deposit Insurance Corporation is a government instrumentality created

in 1963 by virtue of Republic Act 3591, as amended entitled, An Act Establishing the Philippine
Deposit Insurance Corporation (PDIC), Defining Its Powers and Duties and for Other Purposes
to insure the deposits of all banks.

1.2) Public Policy Objectives

● to promote and safeguard the interests of the depositing public by way of

providing insurance coverage on all insured deposits.
● to strengthen the mandatory deposit insurance coverage system to
generate, preserve, and maintain faith and confidence in the country's
banking system and protect it from illegal schemes and machinations.

1.3) Mandates

● Deposit Insurance- PDIC provides a maximum deposit insurance

coverage of PhP500,000 per depositor per bank. To pay claims on
insured deposits, PDIC builds up the Deposit Insurance Fund (DIF)
primarily through assessments of banks at an annual flat rate of 1/5 of 1%
of their total deposit liabilities.
● Receivership of Closed Banks-PDIC proceeds with the liquidation
process upon order of the Monetary Board of the Bangko Sentral ng
Pilipinas (BSP). The assets of the closed bank are managed and
eventually disposed of to settle claims of creditors in accordance with the
preference and concurrence of credits as provided by the Civil Code of
the Philippines

1.4) Membership

● Membership with PDIC is mandatory for all banks licensed by the BSP to
operate in the Philippines: (see enumerations)

As of 2018, there are 43 universal and commercial banks, 57 thrift banks,

492 rural banks, 40 credit unions, and 6,267 non-banks with quasi-banking
functions in the Philippines (David, 2018)

1.5) Scope of Deposit Insurance Protection

● PDIC provides a maximum deposit insurance coverage of PhP500,000

per depositor per bank. It covers all types of bank deposits in banks
whether denominated in local or foreign currencies. All deposit accounts
of a depositor in a closed bank maintained in the same right and capacity
shall be added together. A joint account shall be insured separately from

Group 3:
Amurao, Edson Caballes, Luis Navarro, John Michael
Bandiola, Eden Campos, Kristia Valbarez, Mcvenz
Benitez, Vhal Edar, Ruchell Villacorta, Paul
 Philippine Deposit Insurance Corporation (PDIC) Act (RA 3591, As Amended) and
Maximum Deposit Insurance (RA 9576)
any individually-owned deposit account

Latest data showed by state deposit insurer that as of September 30,

2020, 96.7% or 76.1 million out of 78.7 million total deposit accounts maintained
in 537 banks nationwide are fully insured by PDIC.

REFERENCES:

● PDIC News/Press Release PR -006-21 release January 27, 2021

● pdic.gov.ph
● https://doingbusinessinthephilippines.com/list-of-banks-in-the-
philippines/ TITLE: LIST OF GENERAL & COMMERCIAL BANKS
IN THE PHILIPPINES Date Published: November 15, 2018
WebSite: Doing Business in the Philippines Author:Venus Angelli
David

Primary Functions: (DICOR) to act as

1. Deposit Insurer – the PDIC shall promote and safeguard the interests of the
depositing public by way of providing permanent and continuing insurance coverage
on all insured deposits.
2. Co-regulator of banks – as a bank regulator, the PDIC is empowered to examine and
investigate banks.
3. Receiver and liquidator of closed banks – the PDIC as receiver shall control,
manage and administer the affairs of the bank

Enumerations:

Insured Deposits
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 P500,000.

By Deposit Type:
• Savings Deposits
• Special Savings
• Demand/ Checking Account
• Negotiable Order of Withdrawal (NOW)
• Certificate of Time Deposits

By Deposit Account:
• Single Account
• Joint Account
• Account “By”, “In Trust For” (ITF) or “For the Account of” (FAO) another person

Group 3:
Amurao, Edson Caballes, Luis Navarro, John Michael
Bandiola, Eden Campos, Kristia Valbarez, Mcvenz
Benitez, Vhal Edar, Ruchell Villacorta, Paul
 Philippine Deposit Insurance Corporation (PDIC) Act (RA 3591, As Amended) and
Maximum Deposit Insurance (RA 9576)
By Currency:
• Philippine peso
• Foreign currencies considered as part of BSP’s international reserves

Joint Accounts
Accounts held under more than one name regardless of whether the conjunction “and”,
“or” or “and/or” is used, shall be insured separately from any individually owned deposit
account, provided that:
● Unless a different sharing is stipulated in the deposit documents, the insured amount up
to the Maximum Deposit Insurance Coverage of Php500,000 shall be divided equally
between or among co-owners of a joint account.
● Joint account is held by a juridical entity and a natural person, the maximum insured
deposit shall be presumed to belong solely to the juridical entity.
● The total shares of a co-owner in several joint accounts may exceed Php500,000 but will
only be insured up to the Maximum Deposit Insurance Coverage of Php500,000.

PDIC Member Banks

PDIC member banks include the following institutions authorized by the Bangko Sentral
ng Pilipinas (BSP) to perform banking functions in the Philippines:

● Banks incorporated under Philippine laws, such as commercial banks, savings banks,
mortgage banks, development banks, rural banks and cooperative banks and stock
savings and loan associations.
● Domestic branches of foreign banks

Modes of Payment:
● By cash
● By making available to each depositor a transferred deposit in another insured bank in
an amount equal to insured deposit of such depositor

General Rule

Under Section 1 of PDIC Act, PDIC referred to as the “Corporation, shall insure as
herein provided, the deposits of all banks which are entitled to the benefits of insurance under
this Act, and which shall have the powers hereinafter granted.

Group 3:
Amurao, Edson Caballes, Luis Navarro, John Michael
Bandiola, Eden Campos, Kristia Valbarez, Mcvenz
Benitez, Vhal Edar, Ruchell Villacorta, Paul
 Philippine Deposit Insurance Corporation (PDIC) Act (RA 3591, As Amended) and
Maximum Deposit Insurance (RA 9576)
Exceptions

Deposit Accounts not entitled to payment: (SHA O2UI)

1. Deposit products that resulted from splitting of deposit.
Splitting of Deposit occurs whenever:
A. deposit account with an outstanding balance more than
P500,000 under the name of persons is broken down and
transferred to two or more accounts in the name of persons
or entities who have no beneficial ownership in the
transferred deposits in their names
B. within 120 days immediately preceding or during a bank-
declared bank holiday or immediately preceding a closure
order issued by the Monetary Board
C. for the purpose of availing the maximum deposit insurance
coverage.

Splitting of Deposit is considered a criminal act punishable

by imprisonment of not less than 6 years but not more than 12
years or a fine not less than P50,000 but not more than
P10,000,000, or both, at the discretion of the court.
2. Money placements by the head office of a foreign bank in its branch in
the Philippines because there is only one entity.
3. Deposits that are determined to be the proceeds of an unlawful activity
as defined under RA 9160 or the Anti-Money Laundering Act, as
amended
4. Deposits payable in a place outside the Philippines (like those in
foreign branches).
5. Deposit accounts or transactions constituting and/or emanating from,
unsafe and unsound banking practice/s, as determined by PDIC, in
consultation with BSP, after due notice and hearing, and publication of a
cease and desist order issued by PDIC against such deposit accounts or
transactions.
6. Deposit accounts or transactions which are unfunded and that are
fictitious or fraudulent.
7. Investment products such as bonds and securities, trust accounts and
other similar instruments.

Certificate of Deposit - No owner/holder of any negotiable certificate of deposit shall be

recognized as a depositor entitled to the rights in PDIC Act unless his name is registered as
owner/holder thereof in the books of the issuing bank.

Proof of claim - The PDIC, in its discretion, may require proof of claims to be filed before
paying the insured deposits, and that in any case where the PDIC is not satisfied as to the

Group 3:
Amurao, Edson Caballes, Luis Navarro, John Michael
Bandiola, Eden Campos, Kristia Valbarez, Mcvenz
Benitez, Vhal Edar, Ruchell Villacorta, Paul
 Philippine Deposit Insurance Corporation (PDIC) Act (RA 3591, As Amended) and
Maximum Deposit Insurance (RA 9576)
validity of a claim, it may require final determination of a court of competent jurisdiction before
paying such claim.

Withholding of payment:

The PDIC may withhold payment of such portion of the insured deposit for the payment
of any liability of such depositor as a stockholder of the closed bank, or of any liability of such
depositor to the closed bank or its receiver, which is not offset against a claim due from such
bank, pending determination and payment of such liability by such depositor or any other liable
therefor.

Definition of Terms:

Asset Distribution Plan. It refers to the plan of distribution of the assets of a closed bank to its
creditors, based on its estimated realizable value as of certain cut-off date, prepared in
accordance with the Rules on Concurrence and Preference of Credits under the Civil Code or
other laws.
Bank and Banking Institution. The term Bank and Banking Institutions shall be synonymous
and interchangeable and shall include banks, commercial banks, savings banks, mortgage
banks, rural banks, development banks, cooperative banks, stock savings and loan association
and branches and agencies in the Philippines of foreign banks and all other corporations
authorized to perform banking functions in the Philippines.
Closed Bank. Closed bank refers to a bank placed under liquidation by the Monetary Board.
Disputed Claim. It refers to a claim or suit against the assets of a closed bank, or for specific
performance, or breach of contract, or damages, of whatever nature or characters, whether for
money or otherwise, liquidated, or unliquidated, fixed or contingent, mature or current, denied by
the receiver.
Insured Bank. The term insured bank means any bank the deposits of which are insured in
accordance with the provisions of this Act.
Transfer Deposit. The term transfer deposit means a deposit in an insured bank made
available to a depositor by the Corporation as payment of insured deposit of such depositor in a
closed bank and assumed by another insured bank.
Valid Claim. It refers to the claim recognized by the receiver or allowed by the liquidation court.

Example Scenario:

CASE: PDIC

Case:

Northwest bank, after a series of ill-advised loans extended, which ended up not being
paid for, and hundreds of thousands of their depositors withdrawing cash to spend during the
lockdown, opted to raise the interest rates with the existing loans to cover up what they lost.
Group 3:
Amurao, Edson Caballes, Luis Navarro, John Michael
Bandiola, Eden Campos, Kristia Valbarez, Mcvenz
Benitez, Vhal Edar, Ruchell Villacorta, Paul
 Philippine Deposit Insurance Corporation (PDIC) Act (RA 3591, As Amended) and
Maximum Deposit Insurance (RA 9576)
This is reviewed by the PDIC board and is considered as an unsound/unsafe banking practice.
What are the next proper actions by the board?

Answer/Reason

The board of the PDIC must submit a report to the monetary board of the BSP, and
within 45 days from submission, the Monetary Board must issue a corrective action or it could
be lowered to 15 days when really seen as detrimental to the general condition of the bank and
its depositors.

The board of the PDIC can also act on their own, when deemed necessary. They could
institute the following corrective actions:

· Issue a cease and desist order/letter

- A cease and desist letter is a document sent to an individual or business to stop allegedly
illegal activity.

· Require the bank or its directors/agents concerned to correct such practices.

CASE A: Single Accounts

A have the following accounts/deposits/financial products in a closed bank under the

liquidation proceedings of the PDIC:

ACCOUNT Account No. AMOUNT

Savings Deposit 1A 200,000.00

Time Deposit 2A 150,000.00

Demand Deposit 3A 400,000.00

How much is insured? How much for each respective account?

Answer:

Group 3:
Amurao, Edson Caballes, Luis Navarro, John Michael
Bandiola, Eden Campos, Kristia Valbarez, Mcvenz
Benitez, Vhal Edar, Ruchell Villacorta, Paul
 Philippine Deposit Insurance Corporation (PDIC) Act (RA 3591, As Amended) and
Maximum Deposit Insurance (RA 9576)

ACCOUNT Account No. AMOUNT INSURED AMOUNT

UNINSURED

Savings Deposit 1A 200,000.00

Time Deposit 2A 150,000.00

Demand Deposit 3A 150,000.00 250,000.00

TOTAL 500,000.00 250,000.00

Reason:

The PDIC law prescribes a maximum insurance of 500,000 for each depositor of a
particular bank. This applies to single accounts which is insured with the maximum as stated.

Case B: Joint Accounts (Silent)

ACCOUNT Account No. AMOUNT

Joint Savings Deposit – A 1A 200,000.00

and B

Time Deposit – A and D 2A 250,000.00

Demand Deposit – A and C 3A 900,000.00

Group 3:
Amurao, Edson Caballes, Luis Navarro, John Michael
Bandiola, Eden Campos, Kristia Valbarez, Mcvenz
Benitez, Vhal Edar, Ruchell Villacorta, Paul
 Philippine Deposit Insurance Corporation (PDIC) Act (RA 3591, As Amended) and
Maximum Deposit Insurance (RA 9576)
How much is the share of A with the insured portions of the following joint accounts?

Answer:

ACCOUNT Account No. AMOUNT INSURED AMOUNT

UNINSURED

Joint Savings Deposit – 1A 100,000.00

A and B

Time Deposit – A and 2A 125,000.00

D

Demand Deposit – A 3A 375,000.00 75,000.00

and C

TOTAL 500,000.00

Reason:

The PDIC law prescribes a maximum insurance of 500,000 for each depositor of a
particular bank. This applies to a depositors share in joint accounts which is insured with the
maximum as stated. Such situation, if no further agreements of how to distribute the deposits, it
will be considered as equally given out to each depositor.

Case B: Joint Accounts (With distribution agreement)

ACCOUNT Account No. AMOUNT

Joint Savings Deposit – A 1A 200,000.00

and B

Time Deposit – A and C 2A 250,000.00

Demand Deposit – A and D 3A 900,000.00

Group 3:
Amurao, Edson Caballes, Luis Navarro, John Michael
Bandiola, Eden Campos, Kristia Valbarez, Mcvenz
Benitez, Vhal Edar, Ruchell Villacorta, Paul
 Philippine Deposit Insurance Corporation (PDIC) Act (RA 3591, As Amended) and
Maximum Deposit Insurance (RA 9576)
How much is the share of A with the insured portions of the following joint accounts?

Distribution Agreement:

ACCOUNT Account No. Distribution Percentage

A B C D

Joint Savings Deposit 1A 40 % 60%

– A and B

Time Deposit – A and 2A 25% 75%

C

Demand Deposit – A 3A 70% 30%

and D

Answer:

ACCOUNT Account No. AMOUNT INSURED AMOUNT

UNINSURED

Joint Savings Deposit – 1A 80,000.00

A and B

Time Deposit – A and 2A 62.500.00

C

Demand Deposit – A 3A 357,500.00 272,500.00

and D

TOTAL 500,000.00

Reason:

Group 3:
Amurao, Edson Caballes, Luis Navarro, John Michael
Bandiola, Eden Campos, Kristia Valbarez, Mcvenz
Benitez, Vhal Edar, Ruchell Villacorta, Paul
 Philippine Deposit Insurance Corporation (PDIC) Act (RA 3591, As Amended) and
Maximum Deposit Insurance (RA 9576)
The PDIC law prescribes a maximum insurance of 500,000 for each depositor of a
particular bank. This applies to single accounts which is insured with the maximum as stated.

Group 3:
Amurao, Edson Caballes, Luis Navarro, John Michael
Bandiola, Eden Campos, Kristia Valbarez, Mcvenz
Benitez, Vhal Edar, Ruchell Villacorta, Paul