OVERVIEW OF THE PHILIPPINE FINANCIAL
SYSTEM
I. THE HISTORY
IN THE YEAR 1900
- Act No. 52 was passed by the First Philippine
Commission placing all banks under the Bureau of
Treasury. The Insular Treasurer was authorized to
supervise and examine banks and banking activities.
IN 1933
- Particular group of Filipinos were trying to
conceptualize a central bank for the
Philippines.
- Resulted from a careful understanding of the
economic provisions of HARE HAWES CUTTING
BILL.
IN FEBRUARY 1929
- The Bureau of Banking under the Department of
Finance took over the task of banking supervision.
IN 1939
- A bill establishing a central bank was drafted by
Secretary of Finance Manuel Roxas and approved by
the Philippine Legislature. However, the bill was
returned by the US government, without action, to the
Commonwealth Government.
FEBRUARY 1948
- President Manuel Roxas submitted to Congress a
bill “Establishing the Central Bank of the Philippines,
defining its powers in the administration of the
monetary and banking system, amending pertinent
provisions of the Administrative Code with respect to
the currency and the Bureau of Banking, and for other
purposes.
JUNE 15 1948
- The bill was signed into law as Republic Act No. 265
(The Central Bank Act) by President Elpidio Quirino.
JANUARY 3 1949
- The Central Bank of the Philippines (CBP) was
inaugurated and formally opened with Hon. Miguel
Cuaderno, S r. as the first governor.
JULY 3 1993
- The Bangko Sentral ng Pilipinas (BSP) was
established to replace the CBP as the country ’s
central monetary authority
BANGKO SENTRAL NG PILIPINAS
The Bangko Sentral ng Pilipinas (BSP) is the central
bank of the Republic of the Philippines. It was
established on 3 July 1993 pursuant to the provisions
of the 1987 Philippine Constitution and the New
Central Bank Act of 1993. The BSP took over from
the Central Bank of Philippines, which was
established on 3 January 1949, as the country ’s
central monetary authority. The BSP enjoys fiscal and
administrative
autonomy from the National Government in the
pursuit of its mandated responsibilities.
VISION
The BSP aims to be a world-class monetary authority
and a catalyst for a globally competitive economy and
financial system that delivers a high quality of life for
all Filipinos.
MISSION
BSP is committed to promote and maintain price
stability and provide proactive leadership in bringing
about a strong financial system conducive to a
balanced and sustainable growth of the economy.
Towards this end, it shall conduct sound monetary
policy and effective supervision over financial
institutions under its jurisdiction.
OVERVIEW OF FUNCTIONS AND OPERATIONS
Objectives
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 and 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.
 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 ensure orderly
conditions in the market.
Other activities. 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.
GOVERNANCE OF THE BANK
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 Economics 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 and financial conglomerate.
payment systems - The BSP is also into the upgrading of its domestic
 Currency Management Sector is mainly prudential standards in areas of capitalization,
responsible for the forecasting, production, connected or pooled lending, loan provisioning, data
distribution, and retirement of Philippine currency, as disclosure, and qualifications of owners and
well as security documents, commemorative medals, managers.
and medallions - The BSP likewise imposes the requirements on the
 Corporate Services Sector is mainly responsible operations on e-bankers.
for the effective management of corporate strategy, - The BSP is backstopped in this regard by the
communications, and risks, as well as the BSP's passage of e-commerce law in June 2000 which
human, financial, technological, and physical facilitated the exchange of information and promoted
resources to support the BSP's core functions the security of electronic transactions.
II. FINANCIAL INSTITUTIONS
WHAT ARE FINANCIAL INSTTITUTIONS?
- government agency or privately owned entity that
collects funds from the public, and from other
institutions, and invests those funds in financial
assets, such as loans, securities, bank deposits, and
income generating property.
- act as intermediaries between saver and borrowers
and are differentiated by the way they obtain and
invest their funds.
IDENTIFIED TYPES OF FINANCIAL INSTITUTIONS:
1) Depository financial institutions
Any group that includes commercial banks, savings
and loan associations, mutual savings banks, and
credit unions-conduct business by accepting public
deposits, which are insured by the federal government
against loss, and channeling their depositors' money
into lending activities.
2) Non depository financial institutions
Such as brokerage firms, life insurance companies,
pension funds, and investment companies, fund their
investment activities directly from the financial
markets by selling securities to the public or by selling
insurance policies, in case of insurance companies.
CAPABILITIES AND OBJECTIVES OF FINANCIAL
THE BANKING INSTITUTION
INSTITUTIONS COMMON OBJECTIVES:
- The Banking Institution in the Philippines can be
- Maintain the balance between the returns and risks.
categorized as private banking and government
- Act as an intermediary between the capital market
banking.
and debt market.
- The private banking institutions are comprised of
- Responsible to transfer funds from investors to the
commercial banking such as universal banks and
companies. (Assist or manage the flow of money in
ordinary commercial bank; thrift banks like savings
the economy.)
and mortgage banks private development banks, and
stock savings and loan association; and the rural
BANK ORGANIZATION AND MANAGEMENT
bank.
THE BANGKO SENTRAL NG PILIPINAS
- The government banking institutions on the other
- The Bangko Sentral ng Pilipinas (BSP) was created
hand consist of Philippine National Bank,
by the Republic Act No. 7653, otherwise known as the
Development Bank of the Philippines, Land Bank of
New Central Bank Act of 1993.
the Philippines and the Philippine AlAmanah Bank.
- The BSP is now the Philippines’ central monetary
PRIVATE BANKING INSTITUTION
authority that provides policy directions in the areas of
1. Commercial Banking Institutions
money, banking and credit.
The Banks that fall under commercial banking
- The BSP’s powers and functions are exercised by its
institutions are the ordinary commercial banks or no
Monetary Board consisting of seven members
expanded commercial banks. These banks continue
appointed by the president of the Philippines.
to account for the bulk of the total resources of
- One of the government sector members of the
banking industry.
Monetary Board must be a member of the Cabinet
2. The Thrift Bank
designated by the President of the Republic, which
Thrift banks are primarily engaged in mobilizing the
position is currently held by the Secretary of Finance.
small savings of the people. They provide funds for
- The New Central Bank Act authorizes the Governor
agriculture and industry at reasonable interest rates.
of BSP to appoint up to three Deputy Governors
The small producers like farmers, fishermen,
subject to the approval of the Monetary Board.
craftsmen, and poor consumers can rely on such
- The Governor is the chief executive officer of the
banks for financing their production and consumptions
BSP and is required to direct and supervise the
inputs. The following banks fall under the category of
operations and interval administration of BSP.
Thrift Banks
- The BSP is aided in its bank monitoring and
3. The Savings and Mortgage Banks
examination processes by credit rating agencies
The primary function of a savings and mortgage bank
is to receive time deposit of different types and to
invest its funds in long term investment.
4. The Savings and Loan Association.
Very similar to the savings and mortgage banks are
the savings and loans associations nowadays.
However, these institutions may either be stock or no
stock corporations.
5. The Private Development Banks
This is quite different from the government institution
of the same name. It is a government entity, formerly
the Rehabilitation Finance Corporations.
6. The Rural Banks.
Rural Banks fulfill the investment function by allowing
small farmers to finance their needs through the
granting of loans for capital or other uses.
GOVERNMENT BANKING INSTITUTIONS
1. The Philippine National Bank
The Philippine National Bank (PNB) operates under
the provision of Executive Order No 80 the 1996
revised charter of PNB.
2. The Development Bank of the Philippines
The Development Bank of the Philippines (DBP)
started operating in 1935 as the National Loan and
Investment Board. Its first mission was to coordinate
and manage trust funds.
3. The Landbank of the Philippines
The Agrarian Reforms Code created the Land Bank of
the Philippine (LBP) to finance the acquisition and
distribution of agricultural estates for division and
resell these small landholders.
4. The Al-Amanah Islamic Investment Bank of the
Philippines
The Al-Amanah Islamic Investment Bank of the
Philippines (Islamic Bank) created under Republic Act
No. 6848 for the purpose of promoting and
accelerating the socio economic growth of Mindanao,
particularly the provinces of Cotabato Lanao de Sur
Lanano de Norte Zamboanga del Sur Zamboanga del
Norte and Sulu.
NON-BANK FINANCIAL INSTITUTION
These are other financial institutions which engage in
specific functions. They provide services related to
claims, financial information, and advice, manage
portfolios of financial assets on behalf of other
economic units, buy and sell claims on institution from
clients, and assist in finding sources for those
economic units seeking loans. These either private or
government non-bank financial institution.
PRIVATE NON-BANK INSTITUTIONS
1. Investment House/Banks
The term “Investment house” is defined to mean as
“any enterprise” which engage in the underwriting of
securities of other corporations. Underwriting is an act
or process of guaranteeing the distribution and sale of
securities of any kind issued by another corporation.
Securities are written evidences of ownership,
interest, or participation in any enterprise, or written
evidences of indebtedness of a person or enterprise.
2. Securities Brokers/Dealers
Pursuant to the provision of the Revised Securities
Act, no broker, dealer, or salesman must engage in
business in the Philippines as such broker, dealer, or
salesman or sell any securities, including securities
exempted under the said law.
3. Building and Loans Association
A building and Loan association is a special type of
savings institution. Because of its very nature,
however, it falls under this category in view of the fact
that it also receives savings from members and lends
fund to them.
4. Credit Unions
A credit union is another type of savings institutions. It
also has for its purpose the inculcation of the habit of
thrift, frugality, and the idea of helping one another.
5. Private Insurance
Private Insurance companies contribute to the
country’s socio-economic development as well as to
the insured.
6. The Pawnshop
Pawnshop provide credit to small borrowers who are
not qualified to obtain small loans from financial
institution. In pawnshop, the cost of borrowing and
terms of payment are generally fair.
7. Trust Companies
A trust company is any corporation formed or
organized for the purpose of acting as trustee or
administering any trust or holding property or on
deposit for the use. Benefit of others.
8. Non Stock Savings and Loans Association
A non-bank savings and loans associations is a
corporation engaged in the business of accumulating
the savings of its member.
9. Financing Companies
Financing companies or partnerships, except those
regulated by the Bangko Sentral, the Insurance
Commissioner and the Cooperative Administration
Office which are primarily organized for the purpose of
extending credit facilities to consumer and to
industrial, commercial, or agricultural enterprise.
10. Other Non-Bank Financial Institutions
These are financial institution that are unknown to
many people. Fund managers, lending investor, and
venture capital corporations are among these
institution.
GOVERNMENT NON-FINANCIAL INSTITUTION
1. The Government Service Insurance System.
On May 13 May 1937, the Government Service
Insurance System (GSIS) started its operation.
Presently, the GSIS administers the following: Life
Insurance Fund, Retirement Fund, Health Insurance
Fund/Medicine, State Insurance Fund/Employees’
Compensation, general Insurance Fund/Property
Insurance, and Barangay Officials’ Life Insurance.
2. The Social Security System
On 1 September 1957, the Social Security System
(SSS) started its operation. At first SSS granted only
death, disability, sickness, and old-age benefits under
its social security program for the workers/employees
in the private sectors. As its capacity the funding and
administrative experience grew, other benefits have
added to the program such as hospitalization benefits
under the Medicare program, employees’
compensation benefits, and maternity benefits.
3. The National Home Mortgage Finance
Corporation
The National Home Mortgage Finance Corporation’s
(NHMFC) primary purpose is to develop and provide a
secondary market for home mortgages granted by
public and/ or private home financing institutions.
Under Section 5 of Presidential Decree No. 1267, the
NHMCF is authorized to exercise the following powers
and functions:
• To purchase, acquire, sell, discount, refinance, or
otherwise deal in home mortgages or participations
therein under such terms and conditions as may be
prescribed by the Board of Directors of the
corporations.
• To borrow funds from domestic or foreign private or
public financial institutions as may from time to time
be required for its operations, and to issue bonds,
promissory notes debentures, and other debt
instruments in local or foreign currency.
• To own, lease, purchase or otherwise acquire, sell
or otherwise dispose of property, real or personal as
may be necessary and appropriate for the conduct of
its business.
• To invest funds or monies of the corporations not
invested in mortgage loans in securities issued by the
national government, Bangko Sentral and other
government entities.
Financial System describes collectively the financial
markets, the participants, and the instruments and
securities that are traded in the said markets. The
functions of the financial system is to channel the
funds from lenders to the borrowers, provide a
medium of exchange, provide a mechanism for risk
sharing and provide a channel through which the
central bank can influence the economy, in general,
and the financial system in particular.
FINANCIAL SYSTEM PARTICIPANTS
Households
Households or consumers are generally described as
that group receiving income, majority of which
typically come from wages and salaries. Gross
savings are equal to current income less current
expenditures. Such income is spent on goods and
services and a part is saved. Goods that are
consumed within a current period are termed non-
durable consumer goods. Goods that will last for more
than a year are termed durable consumer goods.
Consumers or households purchase non-durables
from current income and borrow for the durables like
cars, washing
machines, air-conditioners and houses.
Financial Institutions/Intermediaries
Financial institutions channel the funds from lenders
to borrowers. They can also be the lenders and
borrowers themselves. If they buy securities they are
lenders but if they are the ones issuing the securities,
they are borrowers.
DIFFERENT BANK FUNCTIONS AND
RELATIONSHIP OF BANKS WITH VARIOUS
CLIENTS
FUNCTIONS OF COMMERCIAL BANKS
A bank is like a pool into which the flow of savings,
the idle surplus money of households and from which
loans are given on interest to individuals and others
who need them for investment or productive uses.
DEFINITION OF A BANK
The Banking Companies Act defines a bank as “A
Bank is a financial institution which accepts money
from the public for the purpose of lending or
investment repayable on demand or otherwise
withdrawable by cheques, drafts or order or
otherwise.”
DEFINITION ACCORDING TO CULBERSTON
“Commercial banks are the institutions that make
short term loans to business and in the process create
money.”
TYPES OF COMMERCIAL BANKS
 DEPOSIT BANKS
 INDUSTRIAL BANKS
 SAVINGS BANKS
 EXCHANGE BANKS
 AGRICULTURAL BANKS
 MISCELLANEOUS BANKS
FUNCTIONS OF COMMERCIAL BANKS
Commercial banks have to perform a variety of
functions which are common to both developed
and developing countries. These are known as
‘General Banking’ functions of the commercial
banks. The modern banks perform a variety of
functions. These can be broadly divided into two
categories:
(a) Primary functions.
(b) Secondary functions.
PRIMARY FUNCTIONS
 1. Acceptance of deposits.
 2. Advancing loans.
 3. Creation of credit.
 4. Clearing of cheques.
 5. Financing foreign trade.
 6. Remittance of funds.
1. Acceptance of deposits
It is the most important function of commercial banks.
They accept deposits in several forms according to
requirements of different sections of the society.
The main kinds of deposits are:
(i) Current Account Deposits or Demand Deposits:
These deposits refer to those deposits which are
repayable by the banks on demand:
1. Such deposits are generally maintained by
businessmen with the intention of making transactions
with such deposits.
2. They can be drawn upon by a cheque without any
restriction.
3. Banks do not pay any interest on these accounts.
Rather, banks impose service charges for running
these accounts.
(ii) Fixed Deposits or Time Deposits:
Fixed deposits refer to those deposits, in which
the amount is deposited with the bank for a fixed
period of time.
1. Such deposits do not enjoy cheque-able facility.
2. These deposits carry a high rate of interest
(iii) Saving Deposits:
These deposits combine features of both current
account deposits and fixed deposits:
1. The depositors are given cheque facility to
withdraw money from their account. But, some
restrictions are imposed on number and amount of
withdrawals, in order to discourage frequent use of
saving deposits.
2. They carry a rate of interest which is less than
interest rate on fixed deposits. It must be noted that
Current Account deposits and saving deposits are
chequable deposits, whereas, fixed deposit is a non-
chequable deposit.
2. Advancing of Loans:
The deposits received by banks are not allowed to
remain idle. So, after keeping certain cash reserves,
the balance is given to needy borrowers and interest
is charged from them, which is the main source of
income for these banks.
Different types of loans and advances made by
Commercial banks are:
(i) Cash Credit:
Cash credit refers to a loan given to the borrower
against his current assets like shares, stocks, bonds,
etc. A credit limit is sanctioned and the amount is
credited in his account. The borrower may withdraw
any amount within his credit limit and interest is
charged on the amount actually withdrawn
(ii) Demand Loans:
Demand loans refer to those loans which can be
recalled on demand by the bank at any time. The
entire sum of demand loan is credited to the account
and interest is payable on the entire sum.
(iii) Shor t-term Loans:
They are given as personal loans against some
collateral security. The money is credited to the
account of borrower and the borrower can withdraw
money from his account and interest is payable on the
entire sum of loan granted.
3. Creation of credit
Credit creation is most significant function of
commercial banks. While sanctioning a loan to a
customer, they do not provide cash to the borrower.
Instead, they open a deposit account from which the
borrower can withdraw. In other words, while
sanctioning a loan, they automatically create deposits,
known as a credit creation from commercial banks.
4. Clearing of cheques.
It is the process of moving a cheque from the bank in
which it was deposited to the bank on which it was
drawn, and the movement of the money in the
opposite direction. This process is called the clearing
cycle and normally results in a credit to the account at
the bank of deposit, and an equivalent debit to the
account at the bank on which it was drawn
SECONDARY FUNCTIONS
1. Agency Services.
2. General Utility Services.
1. Agency Services:
Banks act as agents to their customers in
different ways:
(i) Collection and Payment of Various Items:
Banks collect cheques, rent, interest etc. on behalf of
their customers and also make payment of taxes,
insurance premia etc. on their behalf.
(ii) Purchase and Sale of Securities:
Banks normally are more knowledgeable with regard
to stock and share business. As such they buy, sell
and keep in safe custody the securities on behalf of
their customers.
(iii) Trustee and Executor:
Banks also act as trustees and executors of the
property of their customers on their advice.
(iv) Remitting of Money:
Banks also remit money from one place to the other
through bank drafts.
(v) Purchase and Sale of Foreign Exchange:
Banks buy and sell foreign exchange and thus
promote international trade. This function is mainly
discharged by Foreign Exchange Banks.
(vi) Letter of References:
Banks also give information about economic position
of their customers to domestic and foreign traders and
likewise provide information about economic position
of domestic and foreign traders to their customers.
2. General Utility Services:
Commercial banks also provide certain services
of general utility to the society:
(i) Locker Facilities:
Banks provide locker facilities to their customers.
People can keep their gold or silver jewelry or other
important documents in these lockers. Their annual
rent is very nominal.
(ii) Traveller’s Cheque and Letters of Credit:
Banks issue traveller’s cheque and letters of credit to
their customers so that they may be spared from the
risk of carrying cash during their journey.
(iii) Business Information and Statistics:
Being familiar with the economic situation of the
country, the banks give advice to their customers on
financial matters on the basis of business information
and statistical data collected by them.
PHILIPPINE DEPOSIT INSURANCE
CORPORATION
A Brief History
 Just like in the United States of America, deposit
insurance in the Philippines was borne out of the need
to stabilize the banking system from a rash of
withdrawals that led to bank runs. In the US,
disruptions caused by bank failures recurred during
the 1800s up to the 1930s. While numerous solutions
were put forth, many of them were based on the
deposit insurance principle.
 Solutions to stabilize the US banking industry were
originally implemented at the level of the State and
initially solicited support from banks on a voluntary
basis.
 As the banking crisis in the US worsened in the
1930s the US Congress passed the Banking Act of
1933, which created the Federal Deposit Insurance
Corporation (FDIC). By its very name, the FDIC
provided deposit insurance on a national level,
starting at USD 2,500 per depositor and made
membership by banks mandatory.
 Thirty years later, the Philippines went through a
similar banking crisis. In order to stabilize the situation
and restore confidence in banks, the Philippines
government created its own version of deposit
insurance system through Republic Act 3591, which
created the Philippine Deposit Insurance Corporation
(PDIC) on June 22, 1963 to protect depositors and
help maintain financial stability. Unlike the Federal
Deposit Insurance of the US, the Philippines initially
adopted a voluntary membership by banks in the
PDIC.
 Mr. Basilio Estanislao, then Special Assistant to
Central Bank Governor Andres Castillo and later
Director of the PDIC itself, was tasked to prepare the
manuscript for Republic Act 3591. Director Estanislao
was quoted to have said that: “The philosophy behind
deposit insurance is for the government to protect the
small, unsophisticated depositors who comprise the
majority, and not the big ones who are more
discriminatory.”
 The foundation for this statement of Director
Estanislao is confidence, the major ingredient that
makes any financial system flourish. Take confidence
away and the financial system crumbles like a house
of cards. This is also why President Franklin D.
Roosevelt in his first “fireside chat” to the people of
the United States of America on March 12, 1933 said
that: “After all, there is an element in the readjustment
of our financial system more important than currency,
more important gold, and that is the confidence of the
people.”
 The PDIC commenced operations in 1968 after the
appointment of the Board of Directors and the release
of the PDIC’s initial permanent insurance fund in the
amount of Php5 million. A year later, Republic Act
5571 made banks’ membership with the PDIC
mandatory. Thereafter, a series of government
actions led to the increase in the maximum deposit
insurance coverage for depositors. Starting with just a
maximum deposit insurance coverage of Php10,000
under Republic Act 3591, the maximum deposit
insurance
coverage was raised as follows:
 The PDIC Charter was further amended in 2009 as
a pre-emptive measure to build confidence in the
banking system amid the brewing global crisis during
that time. Aside from the doubling of maximum
deposit insurance coverage from Php250,000 to
Php500,000, the PDIC was granted the flexibility to
adjust the maximum deposit insurance coverage
when the financial stability of the banking system is
threatened.
 The latest amendments to the PDIC Charter also
provided for institutional and financial strengthening
measures to build up the Deposit Insurance Fund and
to reinforce PDIC’s role as a member of the country’s
financial safety net while continually providing
depositor protection. PDIC’s co-regulatory powers
were also expanded in terms of determining insured
deposits, examining deposit accounts in cases of
finding of unsafe and unsound banking practices, and
conducting special bank examinations.
FREQUENTLY ASKED QUESTIONS
 What is the Philippine Deposit Insurance
Corporation (PDIC)?
- PDIC is a government instrumentality created in
1963 by virtue of Republic Act 3591 to insure the
deposits of all banks which are entitled to the benefits
of insurance. The latest amendments to RA 3591 are
contained in RA 10846 signed into law on May 23,
2016. RA 10846 empowered PDIC with stronger
authorities to protect the depositing public and
promote financial stability. The new law also includes
important provisions to ensure that the PDIC remains
financially and institutionally strong to fulfill its
mandate under its Charter.
- The PDIC now has the authority to help depositors
have quicker access to their insured deposits should
their bank close; resolve problem banks while still
open; hasten the liquidation process for closed banks;
and mete out stiffer sanctions and penalties against
those who engage in unsafe and unsound banking
practices. The PDIC is an attached agency of the
Department of Finance.
 What is PDIC’s overall mandate?
- PDIC exists to provide deposit insurance coverage
for the depositing public to help promote public
confidence and stability in the economy. It ensures
prompt payment of insured deposits, exercises
complementary supervision of banks, adopts
responsive resolution methods, and applies efficient
management of receivership and liquidation functions.
 What are the functions of PDIC?
- Deposit Insurer
- Co-regulator of Banks
- Receiver and Liquidator of Closed Banks
 What is PDIC’s maximum deposit insurance
coverage?
- Effective June 1, 2009, the maximum deposit
insurance coverage is P500,000 per depositor. All
deposit accounts by a depositor in a closed bank
maintained in the same right and capacity shall be
added together.
- Under R.A. No. 9576, the PDIC may proposed to
adjust the MDIC, subject to the approval of the
President of the Philippines, in case of a condition that
threatens the monetary and financial stability of the
banking system that may have systematic
consequences.
 What is an insured deposit?
- The term ‘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 date of closure, but not to
exceed P500,000.00.
- A joint account shall be insured separately from any
individually-owned deposit account.
- R.A. No. 9576 stipulates that PDIC will not pay
deposit insurance for the following accounts or
transactions:
 Investment products such as bonds, securities and
trust accounts;
 Deposit accounts which are unfunded, fictitious or
fraudulent;
 Deposit products constituting or emanating from
unsafe and unsound banking practices;
 Deposits that are determined to be proceeds of an
unlawful activity as defined under the Anti-Money
Laundering Law.
 Are all banks members of PDIC?
- Membership of banks to PDIC is mandatory; hence,
all operating banks are members of PDIC.
 What types of deposits are insured by PDIC?
- Except for the exclusions stipulated in RA 9576,
deposits of all commercial banks, savings and
mortgage banks, rural banks, private development
banks, cooperative banks, savings and loan
associations, as well as branches and agencies in the
Philippines of foreign banks and all other corporations
authorized to perform banking functions in the
Philippines, are insured with PDIC. As for Philippine
banks with branches outside the country, RA 9576
stipulates that subject to the approval of the Board of
Directors, any insured bank with branch outside the
Philippines may elect to include for insurance its
deposit obligations payable at such branch.
- Foreign currency deposits are also insured by PDIC
pursuant to RA 6426 (“An act instituting a foreign
currency deposit system in the Philippines, and for
other purposes”) and Central Bank (CB) Circular No.
1389. Depositors may receive payment in the same
currency in which the insured deposit is denominated.
- Exclusions from deposit insurance coverage as
stipulated in R.A. No. 9576:
 Investment products such as bonds, securities and
trust accounts;
 Deposit accounts which are unfunded, fictitious or
fraudulent;
 Deposit products constituting or emanating from
unsafe and unsound banking practices;
 Deposits that are determined to be proceeds of an
unlawful activity as defined under the Anti-Money
Laundering Law.
 Are deposits maintained in branches and
subsidiaries of foreign banks operating in the
Philippines insured by the PDIC?
- Yes, the PDIC Charter provides that the deposits in
branches and subsidiaries of foreign banks licensed
by the Bangko Sentral ng Pilipinas (BSP) to perform
banking functions in the Philippines are insured by the
PDIC.
 Are deposits maintained in the Philippine banks
with branches outside the Philippines insured by
the PDIC?
- The PDIC Charter provides that a Philippine bank
may elect to insure with the PDIC its deposits in
branches outside the Philippines. As of 31 December
2012, no Philippine bank has elected to insure
deposits in their foreign branches with PDIC.
- To verify if your deposits in a branch of a Philippine
bank outside the Philippines are covered by deposit
insurance in the host foreign country, please inquire
with the account officer of your branch.
 What specific risks to a bank does PDIC cover?
- PDIC covers only the risk of a bank closure ordered
by the Monetary Board. Thus, bank losses due to
theft, fire, closure by reason of strike or existence of
public
disorder, revolution or civil war, are not covered by
PDIC.
 Shall the depositor pay any insurance premium
to PDIC?
- No. Insurance premium is paid by the banks, not by
the depositors. The bank is assessed 1/5 of 1% per
annum of the assessment base of the bank.
 How is insurance coverage determined?
- In determining the insured amount, the outstanding
balance of each account is adjusted, such that
interests are updated, withholding taxes are deducted,
accounts maintained by a depositor in the same right
and capacity are added together; and whenever
applicable, unpaid loans and other obligations of the
depositor are deducted; and in no case shall insured
deposit exceed P500,000.
- R.A. No. 9576 stipulates that PDIC will not pay
deposit insurance for the following accounts or
transactions:
 Investment products such as bonds, securities and
trust accounts;
 Deposit accounts which are unfunded, fictitious or
fraudulent;
 Deposit products constituting or emanating from
unsafe and unsound
banking practices;
 Deposits that are determined to be proceeds of an
unlawful activity as defined under the Anti-Money
Laundering Law.
 Can PDIC insurance coverage be increased by
having several accounts in the same
name in an insured bank?
- No. Deposit insurance coverage is not determined
on a per-account basis. The type of account (whether
checking, savings, time or other form of deposit) has
no bearing on the amount of insurance coverage.
 If I have deposits in several different insured
banks, will my deposits be added together for
insurance purposes?
- No. Deposits in different banking institutions are
insured separately. However, if a bank has one or
more branches, the main office and all branch offices
are considered as one bank. Thus, if you have
deposits at the main office and at one or more branch
offices of the same bank, the deposits are added
together when determining deposit insurance
coverage, the total of which shall not exceed
P500,000.
 Is there a need for a depositor to file his claim
for insured deposit with PDIC?
- Yes. Depositors will be advised through the national
and/or local media and posters at the premises of the
closed insured bank and other public places within
the locality on the schedule of distribution of claim
forms by PDIC, receiving of claim forms by PDIC, and
the prescriptive date of filing claims by the depositors.
 When should the depositor of a closed insured
bank file his claim with PDIC?
- The depositor of the closed insured bank has 24
months from date of bank takeover to file his deposit
insurance claim.
 What happens when the depositor of a closed
bank fails to file his claim within the 24-month
period?
- All rights of the depositor with respect to the insured
deposit shall no longer be honored. But he may still
make a claim against the assets of the closed bank.
 How long does it take PDIC to settle a claim for
insured deposit?
- PDIC aims to pay valid claims as soon as possible.
Prior to payout, claims are examined thoroughly. This
is to protect the Deposit Insurance Fund (DIF) which
is
the source of insurance payments. Sometimes,
depositors mistakenly assume that the payouts are
sourced from their deposits. This is not the case. The
payouts are from PDIC’s own funds.
- The claim for insured deposit should be settled
within six (6) months from the date of filing provided
all requirements are met but the claim must be filed
within twentyfour (24) months after bank takeover.
The six-month period shall not apply if the documents
of the claimant are incomplete or if the validity of the
claim requires the resolution of issues of facts and law
by another office, body or agency, independently or in
coordination with PDIC.
 What processes are involved before PDIC starts
servicing claims?
- Deposit records are subjected to an examination
prior to the start of servicing/settlement of claims.
Claims are evaluated and processed according to
PDIC’s standard procedures.
 How long does the pre-settlement examination
take?
- The length of time needed for the pre-settlement
examination of deposit liabilities of a closed insured
bank largely depends on the completeness and
accuracy of records turned over by the Bank of PDIC
and the number of deposit accounts to be examined.
 If the deposit account in a closed bank is more
than P500,000.00, what happens to the excess of
the maximum amount of insured deposit?
- The claim for the uninsured portion of the deposit is
a claim against the assets of the closed bank.
- The claim may be filed with the Liquidator of the
closed bank within sixty (60) days from publication of
notice of closure. However, payment of said claim will
depend on the bank’s available assets and approval
of the Liquidation Court. The schedule of payment
beyond the P500,000.00 maximum insurance shall be
based on priorities set by law.