MODULE 7

PHILIPPINE DEPOSIT
INSURANCE CORPORATION
R.A. 3591, AS AMENDED
R.A. 9302
R.A. 9576
RA 10846
PDIC Law
7.1 PDIC Law *
7.1.1 Insurable deposits
7.1.2 Maximum liability
7.1.3 Requirements for Claims
BASIC POLICY

What is the basic policy for the creation of the PDIC?

A: PDIC shall promote and safeguard the interests of the
depositing public by way of providing permanent and
continuing insurance coverage in all insured deposits. (As
Amended by Sec. 1, R.A. 9302)

All deposits of any bank are insured with the PDIC.

Deposit Insurance

*All deposits of any bank are insured with the PDIC.

*Obligation to pay the premium lies on the bank.

Risk insured against: closure of banks due to liquidity

problems.
COVERAGE OF INSURANCE

Q: What is the coverage of the insurance?

A: The deposit liabilities of any bank or banking

institution, which is engaged in the business of receiving
deposits, shall be insured with PDIC. The coverage is
compulsory.
Concept of Insured Deposits

 What is an insured deposit?

 A: Insured deposit 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 closure, but not to exceed
P500,000.00. Such net amount shall be determined
according to such regulations as the Board of Directors
may prescribe. (As amended by Sec. 3, R.A. 9576)
Liability to Depositors
Deposit Liabilities Required to be
Insured with PDIC
Q: What are the deposits covered by the insurance?

A:
1. The unpaid balance of money or its equivalent received by a bank in the
usual course of business and for which it has given of is obliged to give credit
to a commercial, checking, savings, time or thrift account, or issued in
accordance with Banko Sentral 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; and
2. Subject to the approval of the Board of Directors, any insured bank which
is incorporated under the laws of the Philippines which maintains a branch
outside the Philippines may elect to include for insurance its deposit
obligations payable only at such branch. (As Amended by Sec. 2 R.A. 9576)
Deposit Liabilities Required to be
Insured with PDIC
Commencement of Liability

Q: When will the liability by the corporation to pay

insured deposits commence?
A: Whenever an insured bank shall have been closed by the
Monetary Board pursuant to Section 30 (Proceedings in
Receivership and Liquidation) of R.A. 7653, otherwise known
as the New Central Bank Act, payment of the insured
deposits on such closed bank shall be made by the
Corporation as soon as possible. (Sec 14 R.A.3591, as
amended)
Deposit Accounts Not Entitled to
Payment
 What are NOT covered by PDIC deposit insurance?
The following, whether denominated, documented, recorded or booked as
deposit by the bank, are excluded from PDIC deposit insurance (Section 4 (f)
of the PDIC Charter):

1. Investment products such as bonds and securities, trust accounts and

other similar instruments
Deposit Accounts Not Entitled to
Payment
 What are NOT covered by PDIC deposit insurance?

2. Deposit accounts or transactions that:

a) Are unfunded, fictitious or fraudulent
b) Constitute and/or emanate from unsafe and unsound banking practice/s as
determined by the PDIC, in consultation with the BSP, after due notice
and hearing and publication of PDIC’s cease & desist order against such
deposit accounts/transactions
c) Are determined to be proceeds of an unlawful activity as defined in the
Anti-Money Laundering Act (Republic Act 9160, as amended)
Deposit Accounts Not Entitled to
Payment
3. Unsafe and unsound deposit-related activities include, among
others: (PDIC Regulatory Issuance No. 2011-01)
a. Deposit-related practice/activity/transaction without the approval
or adequate controls required under existing laws, rules and
regulations -- Failure to keep bank records within bank premises
b. Granting high interest rates, when bank has:
(i) negative unimpaired capital, or
(ii) liquid assets to deposit ratio less than 10%
c. Non-compliance with PDIC regulations
Maximum Deposit Insurance Coverage
(MDIC)
PDIC shall pay deposit insurance on all valid deposits up to the
Maximum Deposit Insurance Coverage of Php500,000, per depositor,
of a closed bank. Accounts maintained in the same right and capacity
for a depositor’s benefit, whether in his own name or in the name of
others, are covered by deposit insurance.
Deposits are considered valid upon the determination by the PDIC,
based on bank records, that the deposits were made with a
corresponding inflow of cash.
Remedy: amounts in excess of 500k can be enforced
against the receiver or liquidator.
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:
1. 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.
2. Domestic branches of foreign banks
What are covered by PDIC deposit insurance?
 PDIC insures valid deposits in domestic offices of its
member banks.
INSURED DEPOSITS

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

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

By Currency:
• Philippine peso
• Foreign currencies considered as part of BSP’s
international reserves
INSURED DEPOSITS

Single Accounts are individually-owned accounts

or accounts held under one name, either as
natural person or juridical entity.
•Natural Person refers to any individual person.
Single proprietors are considered natural persons.
•Juridical entity refers to a corporation,
partnership or cooperative.
INSURED DEPOSITS

 Joint Accounts are accounts held under more

than one name.
 single account is
different from joint
account in terms of

INSURED DEPOSITS
insurance

• A joint account regardless of whether the conjunction “and”, “or”

or “and/or” is used shall be insured separately from single accounts.
• 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.
• 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.
• Joint accounts held in the names of a juridical entity and a natural
person shall be presumed to belong solely to the juridical entity.
INSURED DEPOSITS

“BY”, “ITF” or “FAO” Accounts

• In a “By” account, Ana by Ben, Ana is the depositor.

• In an “In Trust For” (ITF) account, Ana In Trust For Ben,
Ben is the depositor.
• In a “For the Account of” (FAO) account, Ana For the
Account of Ben, Ben is the depositor.
INSURED DEPOSITS

To simplify:
 In the case where a depositor is the sole beneficial owner
of a single, “For the Account of”, “By”, and “In Trust For”
accounts, the consolidated balances of these accounts
shall be insured up to Php500,000.
 The depositor’s total shares in his/her joint accounts shall
be separately insured up to Php500,000.
 A depositor with single accounts and joint accounts may
have insured deposits of up to Php1,000,000.
500k for all joint accounts
Illustrative examples:

1. How much is Fe Santos’s insured deposit if she has the following four deposit
accounts in the same bank?
 Illustrative examples:
2. How much is Fe Santos’s insured deposit if she has the following three joint
accounts in the same bank?

*2/ Mrs. Fe Santos does not have any insured deposit share since she already has
P500,000 in total shares in the two joint accounts she has with Ben and Charlie
Santos.
 Illustrative examples:
3. How much is Fe Santos’s insured deposit for all her single and joint accounts in
the same bank?

 For purposes of computing the insured deposits, all obligations or loans of the
depositor with the closed bank, as of bank closure, shall be deducted from
the depositor’s total deposits with the said bank. (PDIC Regulatory Issuance
No. 2011-04)
Q: Is the liability of PDI on a per bank or per branch basis?
A: Per bank basis. (Catindig 2003, Verde Publications)
Mode of Payment

Payment of the insured deposits shall be made by the

Corporation as soon as possible either:
1. By cash or
2. By making available to each depositor a transferred
deposit in another insured. (Sec. 14, RA 3591)
Effect of Payment

1) PDIC is discharged from obligations.

2) PDIC is subrogated to depositor’s rights
enforcing the rights against reciever to liquadation of the closed abnk
Effect of failure to Settle Claim of Insured
Depositor

 Failure to settle the claim, within 6 months from the

date of filing of claim for insured deposit, where such
failure was due to grave abuse of discretion, gross
negligence, bad faith, or malice, shall subject the
directors, officers or employees responsible to
imprisonment from 6 months to 1 year.
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 deposits with the PDIC:
 Within 2 years from actual takeover of the closed bank by the receiver, or;
 Within 2 years after the two-year period to file a claim, all rights of the depositor
against the Corporation shall be barred.
 However, all rights of the depositor against the closed bank and its shareholders or
the receivership estate to which the Corporation may have become subrogated,
shall revert to the depositor.

 Prescriptive period – 2 years. The claim must

be filed within 2 years from actual takeover by
the receiver.
 The PDIC should process within 6 months.
Prohibition against Splitting of Deposits
if you know someone in the bank who told you about it and then split the banks, youre dead lol

 The penalty of prision mayor or fine of not less than

P50,000 but not more than P2,000,000 or both shall be
imposed upon any director, officer, employee or agent of a
bank for:
 Xxx 5) splitting of deposits or creation of fictitious loans
or deposit accounts. (Sec. 21 [f], RA 3591).
 Prohibition Against Splitting of
Deposits

"Splitting of deposits occurs whenever a deposit account with an

outstanding balance of more that the statutory maximum amount of
insured deposit maintained under the name of natural or juridical
persons is broken down and transferred into two (2) 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 one hundred twenty (120) days
immediately preceding or during a bank-declared bank
holiday, or immediately preceding a closure order issued by
the Monetary Board of the Bangko Sentral ng Pilipinas for the purpose of
availing of the maximum deposit insurancecoverage."
ILLUSTRATION 1- SINGLE ACCOUNTS
NAME OF DEPOSITOR/BENEFICIAL TYPE OF ACCOUNT BALANCE
OWNER DEPOSIT NO.

JUAN DELA CRUZ (Maintained in the Savings 1 P100,000

H.O.) Deposit
JUAN DELA CRUZ (Maintained in the Time Deposit 2 500,000
H.O.)
JUAN DELA CRUZ (Maintained in the Demand 3 100,000
Branch 1) Deposit
JUAN DELA CRUZ (Maintained in the Time Deposit 4 200,000
Branch 2)
TOTAL P900,000
Questions:
1. How much is the covered insured deposit of Juan Dela Cruz?
2. How much is the Uninsured deposit of Juan Dela Cruz?
ILLUSTRATION 2- SINGLE ACCOUNT/S and
SOLE PROPRIETORSHIP
ACCOUNT NAME PER BANK RECORDS TYPE OF DEPOSIT ACCOUN BALANCE
T NO.
JUAN DELA CRUZ Savings Deposit 1 P100,000
JUAN DELA CRUZ Time Deposit 2 400,000
JUAN DELA CRUZ Demand Deposit 3 300,000
JUAN DELA CRUZ FLOWER SHOP (SOLE Savings deposit 4 100,000
PROPRIETORSHIP BY Juan Dela Cruz)
TOTAL P900,000
Questions:
1. How much is the covered insured deposit of Juan Dela Cruz?
2. How much is the Uninsured deposit of Juan Dela Cruz?
3. How much is the covered insured deposit of dela cruz Flower Shop?
4. How much is the Uninsured deposit of dela cruz Flower Shop?
ILLUSTRATION 3- SINGLE, “ITF”, AND “By Accounts

ACCOUNT NAME PER BANK RECORDS TYPE OF DEPOSIT ACCOUN BALANCE

T NO.
JUAN DELA CRUZ Demand Deposit 1 P200,000
JUAN DELA CRUZ ITF Antonio Dela Cruz Savings Deposit 2 400,000
JUAN DELA CRUZ By Maria Dela Cruz Time Deposit 3 500,000
JUAN DELA CRUZ By Maria Dela Cruz or Time deposit 4 500,000
Pedro Dela Cruz
TOTAL P1,600,000
Questions:
1. How much is the covered insured deposit of Juan Dela Cruz?
2. How much is the Uninsured deposit of Juan Dela Cruz?
3. How much is the covered insured deposit of Antonio dela Cruz?
4. How much is the Uninsured deposit of Antonio dela Cruz?
ILLUSTRATION 4- SINGLE ACCOUNTS AND JOINT ACCOUNTS
aah always
think na from
500,000

ACCOUNT NAME PER BANK RECORDS TYPE OF DEPOSIT ACCOUN BALANCE

T NO.

JUAN DELA CRUZ Savings Deposit 1 P600,000

JUAN DELA CRUZ and MARIA DELA CRUZ Time Deposit 2 500,000

JUAN DELA CRUZ OR PEDRO DELA CRUZ Demand Deposit 3 800,000

TOTAL P1,900,000

Questions:
1. How much is the covered insured deposit of Juan Dela Cruz FOR HIS SINGLE ACCOUNT?
2. How much is the covered insured deposit of Juan Dela Cruz FOR HIS JOINTACCOUNT?
3. How much is the covered insured deposit of Maria Dela Cruz for her Joint Account?
4. How much is the covered insured deposit of Pedro Dela Cruz FOR HIS JOINTACCOUNT
5. How much is the Uninsured deposit of Juan Dela Cruz for his single account?
6. How much is the Uninsured deposit of Juan Dela Cruz for his joint account?
7. How much is the Uninsured deposit of Pedro Dela Cruz for his Joint account?
ILLUSTRATION 5- ACCOUNTS JOINTLY OWNED BY
INDIVIDUALS OR NATURAL PERSONS hati rin ata sa
uninsured portion

ACCOUNT NAME PER BANK RECORDS TYPE OF DEPOSIT ACCO BALANCE

UNT
NO.
JUAN DELA CRUZ Savings Deposit 1 P500,000

JUAN DELA CRUZ or MARIA DELA CRUZ Savings Deposit 2 600,000

JUAN DELA CRUZ and PEDRO DELA CRUZ Time Deposit 3 500,000

JUAN DELA CRUZ or Maria Dela Cruz or PeDRO DELA CRUZ Time Deposit 4 450,000

TOTAL P2,050,000

Questions:
1. How much is the covered insured deposit of Juan Dela Cruz FOR HIS SINGLE ACCOUNT?
2. How much is the covered insured deposit of Juan Dela Cruz FOR HIS JOINT ACCOUNT?
3. How much is the covered insured deposit of Maria Dela Cruz for her Joint Account?
4. How much is the covered insured deposit of Pedro Dela Cruz FOR HIS JOINT ACCOUNT?
5. How much is the Uninsured deposit of Juan Dela Cruz for his joint account?
6. How much is the Uninsured deposit of Maria Dela Cruz for her Joint account?
ILLUSTRATION 6- ACCOUNTS JOINTLY OWNED BY
INDIVIDUALS/NATURAL PERSONS and JURIDICAL PERSONS
OR ENTITIES
ACCOUNT NAME PER BANK RECORDS TYPE OF DEPOSIT ACCOUNT BALANCE
NO.

JUAN DELA CRUZ or MARIA DELA CRUZ Savings Deposit 1 P500,000

XYZ CORPORATION Savings Deposit 2 600,000

JUAN DELA CRUZ AND ABC CORPORATION Demand Deposit 3 500,000

TOTAL P1,500,000

Questions:
1. How much is the covered insured deposit of Juan Dela Cruz?
2. How much is the covered insured deposit of Maria Dela Cruz?
3. How much is the covered insured deposit of XYZ CORP?
4. How much is the covered insured deposit of ABC CORP?