PHILIPPINE DEPOSIT INSURANCE

CORPORATION ACT
By: PONCE, Enrico and
VALMORES, Gay Valerie

A. Basic Policy

(Sec.1)
 To promote and safeguard the interests of the depositing

public by way of providing permanent and continuing insurance
coverage on all insured deposits.

B. Main Functions

1. Insurance of Banks (Sec.5)

To insure the deposit liabilities of any bank or banking institution
engaged in the business of receiving deposits or which thereafter
may engage in the business of receiving deposits.

2. Examination of Banks (Sec. 8 and 9)


To conduct examination of banks with prior approval of the
Monetary Board. No examination can be conducted within twelve
months from the last examination date. 
 The Board of Directors
shall appoint examiners who shall have power, on behalf of the
PDIC to examine any insured bank. Such examiner shall have the
power to make a thorough examination of all the affairs of the bank
and in doing so, he shall have the power to administer oaths, to
examine and take and preserve the testimony of any of the officers
and agents thereof, and, to compel the presentation of books,
documents, papers, or records necessary in his judgment to
ascertain the facts relative to the condition of the bank; and shall
make a full and detailed report of the condition of the bank to the
PDIC. 
 The Board of Directors shall appoint claim agents who shall
have the power to investigate and examine all claims for insured
deposits and transferred deposits. Each claim agent shall have the
power to administer oaths and to examine under oath and take and
preserve testimony of any person relating to such claim.

3. Rehabilitation of Banks (Sec.17)


Money of the PDIC not otherwise employed shall be invested in
obligations of the Republic of the Philippines or in obligations
guaranteed as to principal and interest by the Republic of the
Philippines. 
 The banking or checking accounts of the PDIC shall

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 be kept with the Bangko Sentral ng Pilipinas, with the Philippine
National Bank, or with any other bank designated as depository or
fiscal agent of the Philippine government.

4. Receivership of Closed Banks (Sec.10)

The PDIC as receiver shall control, manage and administer the
affairs of the closed bank. Effective immediately upon takeover as
receiver of such bank, the powers, functions and duties, as well as
all allowances, remunerations and perquisites of the directors,
officers, and stockholders of such bank are suspended, and the
relevant provisions of the Articles of PDIC and By-laws of the
closed bank are likewise deemed suspended. 
 The assets of the
closed bank under receivership shall be deemed in custodia legis in
the hands of the receiver. From the time the closed bank is placed
under such receivership, its assets shall not be subject to
attachment, garnishment, execution, levy or any other court
processes.

5. Liquidation of Closed Banks (Sec.30, R.A.7653)

Whenever, upon report of the head of the supervising or examining
department, the Monetary Board finds that a bank or quasi-bank:

a. Is unable to pay its liabilities as they become due in

the ordinary course of business: Provided, That this
shall not include inability to pay caused by
extraordinary demands induced by financial panic in
the banking community;
b. Has insufficient realizable assets, as determined by
the Bangko Sentral, to meet its liabilities; or

c. Cannot continue in business without involving
probable losses to its depositors or creditors; or
d. Has willfully violated a cease and desist order under
SEC 37 that has become final, involving acts or
transactions which amount to fraud or a dissipation of
the assets of the institution; in which cases, the
Monetary Board may summarily and without need for
prior hearing forbid the institution from doing business
in the Philippines and designate the Philippine
Deposit Insurance PDIC as receiver of the banking
institution.

For a quasi-bank, any person of recognized competence in banking

or finance may be designed as receiver. 
 The receiver shall
immediately gather and take charge of all the assets and liabilities
of the institution, administer the same for the benefit of its creditors,
and exercise the general powers of a receiver under the Revised

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Rules of Court but shall not, with the exception of administrative
expenditures, pay or commit any act that will involve the transfer or
disposition of any asset of the institution: Provided, That the
receiver may deposit or place the funds of the institution in non-
speculative investments. The receiver shall determine as soon as
possible, but not later than ninety (90) days from take over, whether
the institution may be rehabilitated or otherwise placed in such a
condition so that it may be permitted to resume business with
safety to its depositors and creditors and the general public:
Provided, That any determination for the resumption of business of
the institution shall be subject to prior approval of the Monetary
Board.

If the receiver determines that the institution cannot be rehabilitated

or permitted to resume business in accordance with the next
preceding paragraph, the Monetary Board shall notify in writing the
board of directors of its findings and direct the receiver to proceed
with the liquidation of the institution. The receiver shall:

1. File ex parte with the proper regional trial court, and

without requirement of prior notice or any other action, a
petition for assistance in the liquidation of the institution
pursuant to a liquidation plan adopted by the Philippine
Deposit Insurance PDIC for general application to all closed
banks. In case of quasi-banks, the Monetary Board shall
adopt the liquidation plan. Upon acquiring jurisdiction, the
court shall, upon motion by the receiver after due notice,
adjudicate disputed claims against the institution, assist the
enforcement of individual liabilities of the stockholders,
directors and officers, and decide on other issues as may be
material to implement the liquidation plan adopted. The
receiver shall pay the cost of the proceedings from the
assets of the institution.

2. Convert the assets of the institutions to money, dispose

of the same to creditors and other parties, for the purpose of
paying the debts of such institution in accordance with the
rules on concurrence and preference of credit under the Civil
Code of the Philippines and he may, in the name of the
institution, and with the assistance of counsel as he may
retain, institute such actions as may be necessary to collect
and recover accounts and assets of, or defend any action
against, the institution. The assets of an institution under
receivership or liquidation shall be deemed in custodia legis
in the hands of the receiver and shall, from the moment the
institution was placed under such receivership or liquidation,

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 be exempt from any order of garnishment, levy, attachment,
or execution.

The actions of the Monetary Board taken under this SEC or under
SEC 29 of this Act shall be final and executory, and may not be
restrained or set aside by the court except on petition for certiorari
on the ground that the action taken was in excess of jurisdiction or
with such grave abuse of discretion as to amount to lack or excess
of jurisdiction. The petition for certiorari may only be filed by the
stockholders of record representing the majority of the capital stock
within ten (10) days from receipt by the board of directors of the
institution of the order directing receivership, liquidation or
conservatorship.

C. Insured Deposits

(Sec.4g) 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.

D. Liability to Depositors

1. Deposit Liabilities Required to be Insured (Sec.5)


The deposit liabilities of any bank or banking institution, which is

engaged in the business of receiving deposits or which thereafter may
engage in the business of receiving deposits, shall be insured with the
PDIC.

2. Commencement of Liability (Sec.14)

Whenever an insured bank shall have been closed by the Monetary

Board, payment of the insured deposits on such closed bank shall be made
by the PDIC as soon as possible either (1) by cash or (2) by making
available to each depositor a transferred deposit in another insured bank in
an amount equal to insured deposit of such depositor. 
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
viability of a claim for an insured deposit, it may require final
determination of a court of competent jurisdiction before paying such
claim. 
Failure to settle the claim, within six (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, upon
conviction, subject the directors, officers or employees of the PDIC

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 responsible for the delay, to imprisonment from six (6) months to one (1)
year. The period shall not apply if the validity of the claim requires the
resolution of issues of facts and or law by another office, body or agency
including the case mentioned in the first proviso or by the PDIC together
with such other office, body or agency.

3. Deposit Accounts Not Entitled to Payment (Sec.4(f))

Any obligation of a bank, which is, payable at the office of the bank
located outside of the Philippines shall not be a deposit or included as part
of the total deposits or of insured deposit. 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.

4. Liability for Contents of Safety Box
Not liable – the Bank has no way of
knowing what a depositor places in his security deposit box.

5. Determination of Insured Deposits (Sec.16)

The PDIC shall commence the determination of insured deposits due the
depositors of a closed bank upon its actual takeover of the closed bank.

6. Calculation of Liability (Sec. 4(g))

Per Depositor, Per Capacity

In determining such amount due to any depositor, there shall be

added together all deposits in the bank maintained in the same right and
capacity for his benefit either in his own name or in the name of others.

Joint Accounts
A joint account regardless of whether the

conjunction "and," "or," "and/or" is used, shall be insured separately from
any individually- owned deposit account. 
If the account is held jointly by
two or more natural persons, or by two or more juridical persons or entities,
the maximum insured deposit shall be divided into as many equal shares as
there are individuals, juridical persons or entities, unless a different sharing
is stipulated in the document of deposit. A juridical person or entity holds

If the account jointly with one or more natural persons, the maximum
insured deposit shall be presumed to belong entirely to such juridical
person or entity. 
The aggregate of the interests of each co-owner over
several joint accounts, whether owned by the same or different
combinations of individuals, juridical persons or entities, shall likewise be

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 subject to the maximum insured deposit of P250,000.00. 
Mode of
Payments (Sec.14)
Payment shall be made by cash or transferred deposit.

Transferred Deposit. Deposit in another insured bank in an amount equal
to insured deposit of such depositor.

E. Failure to Settle Claim of an Insured Depositor

(Sec. 14)
 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 viability of a claim for an insured deposit,
it may require final determination of a court of competent jurisdiction
before paying such claim.

Failure to settle the claim, within six (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, upon
conviction, subject the directors, officers or employees of the PDIC
responsible for the delay, to imprisonment from six (6) months to one (1)
year.

F. Failure of Depositor to Claim Insured Deposit

(Sec.16 (e))
 If the depositor in the closed bank shall fail to claim
his insured deposits with the Corporation within two (2) years from actual
takeover of the closed bank by the receiver, or does not enforce his claim
filed with the corporation within two (2) years after the two-year period to
file a claim as mentioned hereinabove, all rights of the depositor against the
Corporation with respect to the insured deposit shall be barred; however, all
rights of the depositor against the closed bank and its shareholders or the
receivership estate to which the Corporation may have become subrogated,
shall thereupon revert to the depositor. Thereafter, the Corporation shall be
discharged from any liability on the insured deposit.

G. Prohibitions

1. Prohibition against the Splitting of Deposits (Sec.21 (f)(5))


Splitting of deposits occurs whenever a deposit account with an
outstanding balance of more than the statutory maximum amount of
insured deposit maintained under the name of natural or juridical
persons is broken down and transferred into two or more accounts in
the name/s of natural or juridical persons or entities who have no
beneficial ownership on transferred deposits in their names within

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 thirty (30) 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 insurance coverage.

2. Prohibition against Issuance of TROs (Sec.22) No court, except the

Court of Appeals, shall issue any temporary restraining order,
preliminary injunction or preliminary mandatory injunction against
the PDIC for any action under the PDIC Act. 
This prohibition
shall apply in all cases; disputes or controversies instituted by a
private party, the insured bank, or any shareholder of the insured
bank. 
The Supreme Court may issue a restraining order or
injunction when the matter is of extreme urgency involving a
constitutional issue, such that unless a temporary restraining order is
issued, grave injustice and irreparable injury will arise. The party
applying for the issuance of a restraining order or injunction shall
file a bond in an amount to be fixed by the Supreme Court, which
bond shall accrue in favor of the Corporation if the court should
finally decide that the applicant was not entitled to the relief sought.

Any restraining order or injunction issued in violation of this is
void and of no force and effect and any judge who has issued the
same shall suffer the penalty of suspension of at least sixty (60) days
without pay.

SPECIAL COMMERCIAL LAWS

Saturdays 2:00pm-4:00pm
Submitted to: Atty. Rosalie DC Cada
Submitted on: October 2, 2015 (softcopy)
October 3, 2015 (hardcopy)