CHAPTER 16 FINANCIAL SYSTEM REGULATORS - PART I BANGKO SENTRAL NG PILIPINAS (BSP) * AND PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC) ** INTRODUCTION Among the most heavily regulated sectors of the nation’s economy is the financial system. ‘The principal regulatory agencies of the Philippine Financial System, their basic subject and nature of regulations are as follows: © Bangko Sentral ng Pilipinas * Philippine Deposit Insurance Corporation ‘© Securities and Exchange Commission Insurance Commission [Regulatory Agency | Subject of Regulation | Nature of Basic Regulations Bangko Sentralng | Alidepository institutions — | Examines the books of Pilipinas . commercial banks that are members of the system, sets Teserve requirements for all banks Philippine Deposit | Commercial banks, mutual | Provides insurance of up to Insurance Corporation | savings banks, savings and | P500,000 for each depositor at (FOIC) Joan associations a bank, examine the books of insured: banks, and imposes restrictions on assets they can ; hold Securities and Organized exchanges and | Requires disclosure of Exchange financial markets information, restricts insider Commission (SEC) trading Insurance Insurance companies, Charter and examine the ‘Commission brokers | books® insurance companies, impose restrictions on assets they can hold, and impose restrictions on branching * Source: www.bsp.gov.ph ** Source: www.pdic.gov.ph250 _ Chapter 16 This chapter covers the basie role of Bangko Sentral ng Pi Philippine Deposit Insurance Corporation in regulating the Fina in the Philippines. jal System SULATION OBJECTIVES OF FINANCIAL RE! The government regulates financial markets and financial institutions for three main reasons a. Toensure the soundness of the financial system, b. To increase the information available to investors, and cc. To improve control of the financial system Discussion a, Ensuring the Soundness of the Financial System In financial markets, one party often does not know enough about the other party to make accurate decisions. This inequality is called asymmetric_information. Asymmetric information can also lead to svidespread collapse of financial intermediaries, referred to as a financial panic, Because providers of funds to financial intermediaries may not be able to assess whether the institutions holding their funds are sound or rot, if they have doubts about the overall health of financial intermediaries, they may want to pull their funds out of both sound and unsound institutions. The possible outcome is a financial panic that produces large losses for the public and causes serious damage to the economy. To protect the public and the economy from financial panics, the government has implemented the following types of regulation: J. Restrictions on Entry Very tight regulations as to who is allowed to set up a financial intermediary and institution have been created. Individuals or groups that want to establish a financial intermediaries, such as a bank or an insurance company must obtain a charter from the SEC and the respective government agency. These agencies look into the credentials of the organizations which should be impeccable and no 44,Reputation og ie hint of scandal or criminal activity tarnishing their personalities, Also a large amount of initial funds are required, 2. Stringent Reporting Requirements Financial institutions and intermediaries must follow strictly the International Accounting and Reporting Standards. Their accounting must comply with strict principles, their books subject to periodic : inspection, and they must make certain information available to the public. 3. Restriction on Assets and Activities These are restrictions on what Financial institutions and intermediaries are allowed to do and what assets they can hold. They are not allowed to engage in certain risky activities or to hold certain risky assets, or at least from holding a greater quantity of these risky assets than is prudent, 4. Deposit Insurance The government ensures that people's deposits (up to a maximum amount of P500,000) can be recovered if the institution that holds these deposits should fail. The most important government agency that provides this type of insurance in the Philippines Deposit Insurance Corporation (PDIC). J. Limits on Competition These restrictions may take any of these forms: a) Restriction on the opening of additional branches in the same location. ; b)_ Restriction on the opening of branches in another location. 6. Restriction on Interest Rate Competition has also been reduced by regulations that impose restrictions on interest rates that can be paid on deposits.252_Chapter 16 b. Increasing Information Available to Investors 1. Asymmetric information in financial markets means that investors ' may be subject to adverse sclection and moral hazard problems that _j may hinder the efficient operation of financial markets. 2. Risky firms or outright crooks may be the most eager to sell securities to unwary investors, and the resulting adverse selection problem may keep investors out of financial market. Furthermore, once an investor has bought a security, thereby lending money to a firm, the borrower may have incentives to engage in risky activities or to commit outright fraud. 3. The presence of this moral hazard problem may also keep investors away moral financial markets. Government regulation can reduce adverse selection and moral hazard problems in fingncial markets and increase their efficiency by increasing the amount of information available to investors. ¢. Improving Control of the Financial System 1. Because banks play a very important role inf determining the supply of money (which in turn affects many aspects of the economy), much regulation of these financial intermediaries is intended to improve control over the money supply. Once such:tegulation is reserve requirements, which make it obligatory for all depository institutions to keep a certain fraction of their deposits in accounts with the BSP. 2. The PDIC gives depositors confidence in the banking system and eliminates widespread bank failures, which can in turn cause large, uncontrollable fluctuations in the quantity of money. The above regulations however, which have taken the form of restriction on nationwide branch banking, restriction on the type of assets the institutions can buy, ceilings on the interest rates they can pay, and limitations on the types of services they can provide — have tended to impede the free flow of capital from surplus to deficit areas, and thus have hurt the efficiency of our capital markets. The result of the ongoing regulatory change has been a blurring of the distinctions between the different types of institutions.Regulation of the Financial System _ 253 PART A. THE ROLE OF BANGKO SENTRAL NG PILIPINAS (BSP) IN FINANCIAL REGULATION On June 14, 1993, President Ramos signed into law R.A. 7653 entitled “The New Central Bank Act”, pursuant to the requirement of the 1987 Constitution for the establishment of an independent Central Monetary Authority. PRIMARY OBJECTIVE OF THE BSP The BSP’s primary objective is to maintain price stability conducive to a balanced and sustainable economic growth. The BSP also aims to promote and preserve monetary stability and the convertibility of the national currency. RESPONSIBILITIES The BSP provides policy directions in the areas of money, banking and credit. It supervises operations of banks and exercises regulatory powers over non-bank financial institutions with quasi-banking functions. Under the New Central Bank Act, the BSP performs the following functions, all of which relate to its status as the Republic’s central monetary authority. + Liquidity Management. The BSP formulates and implements monetary policy aimed at influencing money supply consistent with its primary objective to maintain price stability. * Currency issue. The BSP has the exclusive power to issue the national currency. All notes and coins issued by the BSP are fully guaranteed by the Government and are considered legal tender for all private arid public debts. + Lender of last resort. The BSP extends discounts, loans and advances to banking institutions for liquidity purposes. + Financial Supervision. The BSP supervises banks and exercises regulatory powers over non-bank institutions performing quasi-banking, functions. © Management of foreign currency reserves. The BSP seeks to maintain sufficient international reserves to meet any foreseeable net demands for foreign currencies in order to preserve the international stability and convertibility of the Philippine peso.284 Chapter 16 + Determination of exchange rate policy. The BSP determines the exchange rate policy of the Philippines. Currently, the BSP adheres to a market-oriented foreign exchange rate policy such that the role of Bangko Sentral is principally to cnsure orderly conditions in the market. © Other activi s. The BSP functions as the banker, financial advisor and official depository of the Government, its political subdivisions and instrumentalities and government-owned and -controlled corporations. BANGKO SENTRAL AS A FISCAL AGENT [As a fiscal agent of the government, the Bangko Sentral has the following functions: 1. Tobe the official representative of the government to financial entities; 2. To be the depository banker of the government; 3. Tobe the financial adviser of the government; and 4. To manage public debts. GOVERNANCE OF THE BANGKO SENTRAL NG PILIPINAS The BSP's Organizational Structure as of 18 July 2018 MONETARY BOARD. GOVERNOR FINANCIAL MONETARY CURRENCY CORPORATE SUPERVISION AND MANAGEMENT SERVICES SECTOR ECONOMICS SECTOR SECTOR. SECTORRegulation of the Financial System _ 255 ‘The Monetary Board exercises the powers and functions of the BSP, such as the conduct of monetary policy and supervision of the financial system. Its chairman is the BSP Governor, with five full-time members from the private sector and one member from the Cabinet. The Governor is the chief executive officer of the BSP and is required to direct and supervise the operations and internal administration of the BSP. A deputy governor (or a Senior Assistant Governor in the case of the Currency Management Sector) heads each of the BSP's operating sector as follows: * Monetary and Economies Sector is mainly responsible for the operations/activities related to monetary policy formulation, implementation, and assessment. Financial Supervision Sector is mainly responsible for the regulation of banks and other BSP-supervised financial institutions, as well as the oversight and supervision of financial technology and payment systems. + Currency Management Sector is mainly responsible for the forecasting, production, . distribution, and retirement. of Philippine currency, as well as security documents, commemorative medals, and medallions.. « Corporate Services Sector is mainly responsible for the effective management of corporate strategy, communications, and risks, as well as the BSP's human, financial, technological, and physical resources to support the BSP's core functions. ADVOCACIES The BSP is deeply involved in various projects and activities aimed towards alleviating poverty, contributing to the global fight against money laundering, increasing transparency of monetary policy and improving the financial literacy of the public. ‘+ The BSP has declared microfinance as its flagship program for poverty alleviation in Year 2000 and has since then played a key role in the development of sustainable microfinance in the country. The BSP initiatives have focused on the policy and regulatory environment, training and capacity building as well as on promotion and advocacy.286 Chapter 16 + The BSP has been conducting public information campaigns in line with the effort to increase public awareness on the role of the BSP in the economy and the financial system and to further enhance the transparency of monetary policy. + The BSP has also taken a proactive stance in embarking on a consumer education program that aims to improve the basic financial literacy of the public. The BSP undertakes various bank-related initiatives to improve the remittance environment and to channel remittances to productive undertakings. Through these initiatives, the BSP intends to maximize the benefits of remittances aimed at: (1) ensuring the smooth inflow of remittances, and (2) promoting their use for development by channeling them to the financial sector so that these funds can be mobilized for lending and other productive activities. INSTRUMENTS OF CENTRAL BANK ACTIONS In order to achieve the BSP’s objective which is maintain monetary stability within and out of the country, the Bangko Sentral endeavors to control’ the expansion or contraction of the money supply, the level of credit, or any rise or fall in prices. Monetary authorities are empowered to institute a number of devices for purposes of proper regulations of the volume of money supply. The devices that may be used by BSP are the following: «Control of legal reserve requirement . Control of discount and rediscount Open market operation . Control of collateral required on bank loans 5. Imposition of portfolio ceiling . Minimum capital ratio Margin requirements for LIC SA AwWAYNE . Moral suasionRegulation of the Financial System 257 Discussion: 1, Control of Legal Bank Reserve Requirement The control of the legal bank reserve is a very significant and effective instrument that the BSP may use in order to effect an expansion or contraction of money supply. The legal bank reserve refers to that portion of the bank’s deposit liability, say 10%, and cannot be available for lending. It is to be set aside as a reserve in the BSP, vaults of the bank or temporarily invested in government securities to meet the withdrawal needs of the depositors. To counteract inflation and decrease the volume of money supply, the BSP will increase the percentage of legal reserve required on banks. This will result to reduction in loanable funds of the banks and will restrict credit expansion: During deflation when supply of money is insufficient, the BSP will decrease the percentage of legal reserve requirement. This action will increase the investible funds of bank and will induce greater credit expansion. 2. Control of the Discount and Rediscount Rates on Loans Credit is intended to banking institutions by the BSP for the following reasons a) tocontrol credit, and b) to increase the liquidity of the banks When the BSP extends credit to banks, interest or discount rate is imposed primarily to control credit and secondarily, to ear income for the government regulator. During inflationary period, the BSP increases the rediscount and discount rates on credit extended to banks, The increase in discount and rediscount rates would discourage banks to borrow from the BSP. The banks will have less funds available for loans thus limiting their lending operations and credit expansion.288 _Chaprer 16 During deflation, the BSP decreases the rediscount and discount rates on credits to banks. This action would encourage banks to borrow more from the BSP thus enabling them to expand their operation through expanded credit to their clients. 3. Purchases and Sales of Government Securities RA 7653 empowers the Monetary Board of BSP to buy and sell in the open market for its own account. (a) debt instruments issued by the government of the Philippines or by its political subdivision and (b) debt instruments issued by government instrumentalities which are fully guaranteed by the government. ‘These debt instruments must be freely negotiable, regularly serviced and available to the general public through banking institutions and local ‘government treasuries in denomination of a thousand pesos or more. 4. Open Market Operation Also under Section no. 90 RA 7653 the BSP may issue, place, buy and sell freely negotiable evidences of indebtedness of the Bangko Sentral. The issuance of such certificates shall be made only in cases of extraordinary movement in price levels and issued directly against the international reserve of the BSP or against the securities which it has acquired under Section 91, RA7653. i The said obligations may be denominated in gold or foreign currencies. The Monetary Board shall determine the interest rates, maturities and other characteristics of the said obligation. ‘These evidences of indebtedness of the BSP. may be acquired by the Bangko Sentral before their maturity either through purchases in the open market or through redemptions at par and by lot. The debt instruments by the BSP shall not be included among its assets and shall be immediately retired and cancelled.Regulation of the Financial System _ 259 5. Control of Collaterals Required on Bank Loans Imposing conditions or requirements on the securities or collateral against the loans extended by banks is one of the powers of the BSP. During inflationary period, the BSP may increase collaterals required on loans which in effect decreases the loan value of the collaterals. This requirement could discourage borrowings from the bank and therefore decrease the lending operations and credit expansion of the bank. On the other hand, the BSP may decrease collaterals required on loans during deflation. This action would encourage bank cheats to borrow more. 6. Portfolio Ceiling Imposition During inflation period, the BSP may place on upper limit on the loans and invested of banks. It is a direct limitation on the amount of loans and investments that banks may extend. The BSP sets a date and total amount of loans and investment the bank could have on that date, 7. Minimum Capital Ratio RA 7653, Section 108 provides that the BSP through the Monetary Board may prescribe the minimum ratios which the capital and surplus of the banks in relation to the banks in relation to the volume of their assets, or to specific categories thereof, and may alter said ratio whenever it deems it necessary. The BSP requires 10% of the risk assets of the bank as its minimum capital required. Thus, total assets minus non-risk assets equals risk assets. 8 Margin Requirements against Letter of Credit- Under Section 105 of RA7653, the BSP through the Monetary Board may at any time prescribe the minimum cash margins for the opening of letters of credits depending on the nature of transactions to be financed. 9, Moral Suasion The BSP may use its persuasive power to make the banks comply or support credit policies without direct imposition of restrictions. It may just use its influence among banks for voluntary support of a credit policy.260 Chapter 16 OTHER MONETARY POLICIES OF THE BSP TO STABILIZE BANKING OPERATION 1 Bangko Sentral may also fix the maximum interest that the bank may pay on deposit substitutes for the purpose of preventing competition among. banks in attracting depositors. Bangko Sentral may establish priorities for bank loans especially with respect to funds, which has been borrowed from the Bangko Sentral. Bangko Sentral may fix maturities in bank loans for the purpose of credit control or as a means of payment. Bangko Sentral makes periodic examination of the banks accounting records and required banks to submit their financial statement at the end of every quarter. . Bangko Sentral looks into the character and integrity of the bank’s incorporators and members of the board as well as the top ranking executives of the bank. Appendix C shows the list of Banks under the supervision of the BSP and are members of PDIC as of September 30, 2019. PART B, THE ROLE OF PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC) IN FINANCIAL REGULATION PDIC is a government instrumentality created in 1963 by Republic’ Act 3591, as amended, to insure the deposits of all banks. PDIC exists to protect depositors by providing deposit insurance coverage for the depositing public and help promote financial stability, PDIC is tasked to strengthen the mandatory deposit insurance coverage system to generate, preserve, maintain faith and confidence in the country’s banking system; and protect it from illegal schemes and machinations.FUNCTIONS OF PDIC IL DEPOSIT INSURANCE The Corporation provides the maximum deposit insurance coverage of Php500,000 per depositor per bank. In promoting financial stability, the PDIC is tasked to continuously build up the level of the Deposit Insurance Fund (DIF), the fund source for deposit insurance payouts and financial assistance to banks, to tenable it to adequately respond to insurance calls. Member-banks are assessed the annual flat rate of 1/5 of 1% of their total deposit liabilities. The assessments are collected from member-banks semi-annually and form part of the DIF. The DIF is managed through prudent investments, as provided in the PDIC Charter. In the event of bank closures, PDIC pays valid deposit accounts and deposit insurance claims as soon as possible and within the set turnaround time to provide immediate relief to depositors. Its quality management system on claims settlement operations is ISO 90012008 certified and at par with international standards, RISK MITIGATION The PDIC works closely with financial regulators in strengthening and maintaining the stability of the banking system. PDIC is authorized to issue regulations to implement its Charter, conduct bank examinations and investigations to determine banks’ financial health and their adherence to rules and regulations on banking and deposit insurance. In pursuit of its role as @ partner in growth of banks, it extends assistance to eligible banks to further enhance their viability and to strengthen the banking system . Il. RECEIVERSHIP AND LIQUIDATION ‘The PDIC is the statutory receiver and liquidator of closed banks, PDIC takes over banks ordered closed by the Monetary Board; administers closed banks’ assets, records and affairs; and preserves and disposes these assets for the benefit of the creditors and uninsured depositors. When the Monetary Board orders the liquidation of a bank that has been placed under receivership, its assets are managed, liquidated, and distributed to creditors and uninsured depositors according to the preference and concurrence of credits as provided for by the Civil Code of the Philippines.262 Chapter 16 GOVERNANCE AND STRUCTURE The organizational structure of PDIC as December 31, 2018 is shown in Figure 16-1 on page 264, Board of Directors The Board of Directors (the “Board”) is primarily responsible for the governance of the Corporation. The Board is the government's agent in pursuing economic growth and development within the ambit of the Corporation's jurisdiction, To this end, it will be necessary to ensure that only individuals who are fit and proper by reason of their experience, education, training and competence can be appointed as members of the Board of PDIC. PDIC, being created by special law, shall have a Board of Directors ‘composed of the following, as prescribed in its Charter: ‘a. The Secretary of Finance who shall be the ex-officio Chairperson of the Board without compensation, b. The Governor of the Bangko Sentral ng Pilipinas (BSP) who shall be ex-officio member of the Board without compensation. ¢. The President of the Corporation, who shall be appointed by the President of the Philippines from a shortlist prepared by the Governance Commission for Government-Owned or -Controlled Corporations pursuant to Republic Act No. 10149 to serve on a full-time basis for a term of six (6) years. The President of the Corporation shall also serve as Vice Chairman of the Board. Four (4) members from the private sector to be appointed for a term of six (6) years by the President of the Philippines from a shorlist prepared by the Governance Commission for Government-Owned or -Controlled Corporations pursuant to Republic Act No. 10149 PDIC ORGANIZATION Executive Committee Chairperson: The President Members: Sector Heads The ExCom shall have the following responsibilities: |. Advise’ and assist in facilitating the endorsement and/or the approval of the President on matters relating to the formulation, monitoring and evaluation of corporate policies, plans and programs;Regulation of the Financial System _263 2. Build a consensus, upon call of the President, on major internal and external developments and concems that will affect the Corporation, particularly is Policies, plans and major programs; and Provide a venue for resolution and issues in the implementation of policies, plans and major programs, In the absence of the President, the Officerin-Charge (OIC) of the Corporation shall chair the Committee. Likewise, in the absence of an ExCom member, the OIC of the Sector shall attend the meeting, ‘The Group Heads of Corporate Planning Group, Intemal Audit Group, Corporate Affairs Group, and Head Executive Assistant - OP shall attend as observers. ‘The Group Heads of Risk Management Office and Corporate Governance Office shall attend the meeting upon request ofthe President/Chairperson. MANAGEMENT COMMITTEE Chairperson: The President Members: Vice President and up ‘The ManCom has the following functions: 1. To provide a venue to communicate decisions and views of the President relating to the implementation of Corporate policies, plans and major programs; and 2. To build consensus upon call of the President on internal and extemal issues that will affect the Corporation, particularly, its policies, plans and major programs. ‘The Mancom shall meet at least once every quarter or whenever necessary and may require the attendance of other officers and staff to provide clarification and/or additional information during the discussion/s. In the absence of the President, the Officer-in-Charge of the Corporation shall chair the Committee.Craw Trois ‘voddns vonnjoseys|_ | woddng uonepinory |__ "B voeuueNs "g diusionle0ey aol org chow soueunsuy L_vounosey —_F-]} | quewa6eueyy eor -—] is OI CHOI SSG | Tang Hol RSOTST diusiayondwoy seounas e607 aANeASIUWDY dhoig Anseasy voueueXs qwawabeuey jessy ora Ty 7 aris Buywuelg voqeBysany, dnoig idnowg weaweBevey yueg ayesadi0g pvonebin soinosey uewny dnoip suelo vonewweg 2B diysianooay BOLDSS WOLDaS woldas SBOUEES ‘suoLo3s YOLOaS S301NUaS BONYUNSNI NoWMOsa¥aNy | | YOLO3s NoLLaINON ANBMBOVNYN, sulv3svV WOR BLYYORUOD 418980 NOLWNINWXA ‘ONY dIHSUBAIZORu t i J enOwd ADOTONHOSL dnous suivsay NOLWNYOENI 21¥eOUOD Z l avisIORS 301430 enous srany BLYuOdsOo BONVIINE3AOD 301440 TWNEEINI BHL 40 301340 BLYYOdYOD ANSW3OYNYW Si | cape ten enc ne aban enn ec een nnneene ee. INSUISHuE. ‘SSLLINNOO SSLLINNOO ALUIMNOD BONVNYBAOS LNBWBO NY Lion aavoa guvoa Sid GavOR [ ‘SUOLOSuIa 40 duvoa 8107 ‘Te 90d Jo su AMjaN.g [wUOHLZIUETIO :]-9] aundyy 91 4aidoyyy9zRegulation of the Financial System _ 265 Relevant Notes on Deposit Insurance A deposit insurance is essentially the assured amount a bank depositor gets in the case that the bank cannot fulfill its obligations, It is mandatory by law and designed to maintain financial stability, What are covered by PDIC Deposit Insurance? PDIC insures valid deposits in domestic offices ofits member-bank: By Depo Type Savings Special Savings Demand / Checking Time Deposits Negotiable Order of Withdrawal (NOW) By Deposit Account Single © Joint account * Account “By”, “In Trust For” (ITF) or “For the Account of” (FA) another person ‘ By Currency © Philippine Peso © Foreign Currencies considered as part of BSP's Intemational reserves What are not covered by PDIC Deposit Insurance? ‘© Investment products such as bonds and securities, trust accounts and other similar instruments. * Deposit accounts of transactions that: 0 Are unfunded, fictitious or fraudulent © Constitute and / or emanate from unsafe and unsound banking practice(s) ‘© Are determined to be proceeds of an unlawful activity as defined in the Anti-Money Laundering Act (as amended)266 _ Chapter 16 What may be considered as unsafe / unsound banking practices? © Solicitation and acceptance of deposits outside bank premises, including branches, without BSP authority © Non-compliance with minimum identification and documentation requirements from depositors in the opening of deposit accounts © Allowing depositors to deposit, withdraw and / or transfer funds Without proper documentation such as duly accomplished deposit withdrawal forms Granting high interest rates when bank has (i) negative unimpaired capital and (ii) either a liquid assets-to-deposits ratio of less than 10% or as operating loss ‘Who are required to file a claim against the assets of a closed bank Creditors of a closed bank including depositors (“ereditors” for brevity) are required to file their claim against the assets of a closed bank. However, creditors whose credits are secured by a duly registered real estate mortgage“ or chattel mortgage’ or duly constituted pledge* are no longer required to file their claims against the assets of the bank. Likewise, depositors who have filed their claims for deposit insurance within sixty (60) days from the date of publication of the notice of closure are no longer required to file their claims against the assets of the bank. ‘When should claims be filed Creditors must file their claim within sixty (60) days from the date of publication of the notice of closure of a bank in a newspaper of general circulation. How should claims be filed 2 Claims shall be fled in writing preferably using the prescribed Claim Form’; b. Claims shall be supported by photocopies of documents: that will establish the liability of the closed bank, such as, but not limited to, the following: i, Statement of Account ii, Billing StatementRegulation of the Financial System _ 267 iii, Promissory Note, Rediscounting Agreement, Loan Agreement iv. Pertinent contracts or agreements, such as, lease contracts, subscription contracts, consultancy agreements, engagement agreements 4 V. For uninsured deposits: passbook/CTD/proof of deposits Vi. Other documents to validate and establish the liability of the bank, as may be applicable. The submitted supporting documents shall be validated against the records of the bank. The originals of the supporting documents shall be presented to PDIC for comparison. For claims filed through mail or electronic mail (e-mail), original supporting documents. shall be submitted to PDIC before release of payment. c. In case PDIC finds the supporting documents to be incomplete or insufficient to establish the liability’ of the bank, it shall issue a notice of documentary deficiency. The claimant shall have fifteen (15) working days from receipt of the said notice to submit the supporting documents. or documentary deficiencies. Where to file the claim a. Claims may be filed personally at the bank premises during takeover operations, or directly at the 3"Floor, PDIC Public Assistance Center, located at the 3"'Floor, SSS Bldg, 6782 Ayala Avenue comer V.A. Rufino St., Makati City, Monday to Friday, 8:00 AM to 5:00 PM. . Claims may also be filed through mail addressed to the Public Assistance Department, PDIC, 6*Floor, 6782 Ayala Avenue comer V.A. Rufino St., Makati City or via email at pad@pdic.gov. ph. PDIC's Procedures in Receiving and Validating Filed Claims a. Acknowledge the receipt of the claim’ and inform the creditor in writing to submit documentary deficiency/ies’ , if any. The creditor must submit ‘the complete supporting documents or documentary deficiency/ies to PDIC within the period provided in, Secs. 3 and 4. b. If the claim is verified to be valid, a Claim Certificate® shall be issued in favor of the creditor for this purpose. c. If the claim is disallowed, the creditor shall be notified in writing of the reason for the disallowance°of his/her claim.268 Chapter 16 Disallowance of Claim due to absence/insufficiency of supporting documents and filing beyond the 60-day period for filing of claims The absence or insufficiency of documents to support the claim shall result in the disallowance of the claim. However, the period to submit the documentary deficiencies may be extended for a maximum period of fifteen (15) working days upon written request of the claimant and on meritorious grounds. Claims filed beyond the prescribed 60-day period for filing of claims shall likewise be disallowed. Remedy from disallowance The claimant has sixty (60) days after receipt of the notice of denial of claim to file his/her claim by request in writing for extension to the liquidator or file with the liquidation court. REVIEW QUESTIONS Questions BSP 1. What are the principal regulatory agencies that are responsible for the protection and enhancement of the Philippine financial system? 2. Give and explain briefly the subject and nature of the basic regulation of the following. « BSP « PDIC ° SEC « Ic 3. What are the reasons why regulation of financial markets and financial institutions are necessary? 4, What are some of the strategies to ensure soundness of the financial system?