Philippine Deposit Insurance Corporation Act
Philippine Deposit Insurance Corporation Act
Philippine Deposit Insurance Corporation Act
RA 3591 (1963), as amended by RA 6037 (1969), PD 120 (1973), PD 1094 (1977), PD 1451 (1978), PD 1935 (1984),
RA 7400 (1992), RA 8791 (2000), RA 9032 (2004), and RA 9576 (2009)
8.1 Topics:
> Significant amendments to the PDIC Act made by RA 9576, approved April 9, 2009
>Main functions
>Receivership of closed banks (Secs. 8 and 10; see also Secs. 30, RA 7653)
>Liability to depositors
>Deposit accounts not entitled to payment (Sec. 4[f], as amended by Sec. 2, RA 9576)
>Payments of insured deposits as preferred credit under Art. 2244, Civil Code (Sec. 15)
>Examination of banks and deposit accounts (Sec. 8, paragraph 8, as amended by Sec. 5, RA 9576)
>Prohibition against splitting of deposits (Secs. 21[f][5], as amended by Sec. 11, RA 9576)
In case a bank fails to fulfill its obligations, deposit insurance is usually availed of by the bank depositor as
compensation for the failure of the bank to carry out its duties. Deposit insurance is a mode of protection, provided
usually by a government agency, to depositors against risk of loss arising from failure of a bank or other depositary
institution. It is mandatory by law and is designed to maintain financial stability.
The PDIC 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.
SIGNIFICANT AMENDMENTS TO THE PDIC ACT MADE BY RA 9576, approved by April 9 2009
1. Amended Section 4[f] and [g] of RA 3591, further elaborating on the provisions regarding ‘deposits’ and ‘insured
deposits’;
2. Added Section 9 [h], which discusses the extent of liability of the Corporation or any of its officers and employees in
cases of willful violation of this Act;
3. Added Section 17[c], which discusses the period when all the tax obligations of the Corporation shall be chargeable
to the Tax Expenditure Fund (TEF);
4. Amended Sec. 19, which further provides that the Corporation shall provide for appropriate reserves for the
redemption or retirement of obligations;
5. Added onto the provision of Section 2, granting the Board of Directors the authority to review the organizational set-
up of the Corporation and adopt a new or revised organizational structure as it may deem necessary for the
Corporation to undertake its mandate and functions.
MAIN FUNCTIONS; consistent with its public policy objectives, the PDIC has the following mandates:
1. Deposit Insurer
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.
2. Co-regulator of Banks
The PDIC works closely with the Bangko Sentral ng Pilipinas (BSP) to help maintain stability in the banking system.
PDIC is authorized to issue regulations to implement its Charter, conduct bank examinations and investigations to
assess financial safety and soundness of banks and their adherence to banking and deposit insurance rules and
regulations, and extend financial assistance to eligible distressed banks.
Whenever a bank is determined by the BangkoSentral ng Pilipinas to be capital deficient, the Corporation may
conduct an insurance risk evaluation on the bank to enable it to assess the risks to the DIF. Such evaluation may
include the determination of: (i) the fair market value of the assets and liabilities of a bank; or (ii) the risk
classification of a bank; or (iii) possible resolution modes under Section 11 of this Act, subject to such terms and
conditions as the PDIC Board may prescribe. (sec 6. RA 10846)
EXAMINATION OF BANKS
SECTION 8
The Corporation has the power to conduct examinations of banks with prior approval of the Monetary Board.
Provided, that no examination can be conducted within twelve (12) months from the last examination date;
Provided, however, That the Corporation may, in coordination with the Bangko Sentral, conduct a special
examination as the Board of Directors, by an affirmative vote of a majority of all of its members, if there is a
threatened or impending closure of a bank;
Provided, further, That, notwithstanding the provisions of the Bank Secrecy Law (RA 1405), Foreign Currency
Deposit Act (RA 6426), the General Banking Law (RA 8791), and other laws, the Corporation and/or the Bangko
Sentral, may inquire into or examine deposit accounts and all information related thereto in case there is a finding of
unsafe or unsound banking practice;
Provided, finally, That to avoid overlapping of efforts, the examination shall maximize the efficient use of the
relevant reports, information, and findings of the Bangko Sentral, which it shall make available to the Corporation;
(As amended by R.A. 9302, 12 August 2004, R.A. 9576, 1 June 2009)
SECTION 9
(b) The Board of Directors shall appoint examiners who shall have power, on behalf of the Corporation to
examine any insured bank. Each 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 Corporation. The Board of Directors in like manner
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.
(b-1) The investigators appointed by the Board of Directors shall have the power on behalf of the
Corporation to conduct investigations on frauds, irregularities and anomalies committed in banks, based on reports
of examination conducted by the Corporation and Bangko Sentral ng Pilipinas or complaints from depositors or from
other government agency. Each such investigator shall have the power to administer oaths, and to examine and
take and preserve the testimony of any person relating to the subject of investigation. For this purpose, the
Corporation may appoint or hire persons or entities of recognized competence in forensic and fraud investigations
as its agents.”
SECTION 10. (a) The provisions of other laws, general or special, to the contrary notwithstanding, whenever it shall
be appropriate for the Monetary Board of the BangkoSentral ng Pilipinasto appoint a receiver of any banking
institution pursuant to existing laws, the Monetary Board shall give prior notice and appoint the Corporation as
receiver. (As amended/renumbered from Sec. 9-A by R.A. 9302, 12 August 2004)
(b) The Corporation 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 Incorporation 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. Therefore, a judge, officer of the court or any
person who shall issue, order, process or cause the issuance or implementation of the writ of garnishment, levy,
attachment or execution shall be liable under Section 21 RA 9576
“SECTION 12. (a) Whenever a bank is ordered closed by the Monetary Board, the Corporation shall be designated
as receiver and it shall proceed with the takeover and liquidation of the closed bank in accordance with this Act. For
this purpose, banks closed by the Monetary Board shall no longer be rehabilitated.” (RA 10846)
SECTION 30, (RA7653). Proceedings in Receivership and Liquidation. - 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 Section 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 Corporation 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 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 takeover, 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 Corporation for general application to all closed banks. In case of quasi-banks, the liquidation
plan shall be adopted by the Monetary Board. 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, be exempt from any order of garnishment, levy, attachment, or execution.
The actions of the Monetary Board taken under this section or under Section 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. The designation of a conservator under Section 29 of this Act or the
appointment of a receiver under this section shall be vested exclusively with the Monetary Board. Furthermore, the
designation of a conservator is not a precondition to the designation of a receiver. (7653)
CONCEPT OF INSURED DEPOSITS (SEC. 4[g])
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 regardless of whether the conjunction "and," "or," "and/or" is used, shall be insured separately from
any individually-owned deposit account; Provided, That:
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; and
If the account is held by a juridical person or entity jointly with one or more natural persons, the maximum insured
deposit shall be presumed to belong entirely to such juridical person or entity.
That the aggregate of the interest 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 subject to the maximum insured
deposit of Five Hundred Thousand Pesos (P500,000.00).
Provided, furthermore, That the provisions of any law to the contrary notwithstanding, no owner/holder of any
negotiable certificate of deposit shall be recognized as a depositor entitled to the rights provided in this Act unless
his name is registered as owner/holder thereof in the books of the issuing bank:
Provided, finally, That, in case of a condition that threatens the monetary and financial stability of the banking
system that may have systemic consequences, as defined in Section 17 hereof, as determined by the Monetary
Board, the maximum deposit insurance cover may be adjusted in such amount, for such a period, and/or for such
deposit products, as may be determined by a unanimous vote of the Board of Directors in a meeting called for the
purpose and chaired by the Secretary of Finance, subject to the approval of the President of the Philippines. (As
amended by R.A. 9302, 12 August 2004; R.A. 9576, 2009, 1 June 2009)
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.
LIABILITY TO DEPOSITORS
The liability to a depositor is equal to the amount of his/her deposit in an insured bank provided it will not exceed
P500, 000.
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 propose 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 systemic consequences.
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 (excess) 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.
• Also, the payment will be made according to the asset distribution plan stated in Section 5 of RA 10846– wherein
the payment will be distributed in accordance with the Rules on Concurrence and Preference of Credits under the
Civil Code or other laws.(New amendment for the PDIC, June 11, 2016)
DEPOSIT LIABILITIES REQUIRED TO BE INSURED WITH PDIC (Sec. 5)
“The deposit liabilities of any bank or banking institution, which is engaged in the business of receiving deposits as
herein defined on the effective date of this Act, or which thereafter may engage in the business of receiving deposits,
shall be insured with the Corporation.”
Section 30. Proceedings in Receivership and Liquidation. - 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 Section 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 Corporation as receiver of the banking institution.
DEPOSIT ACCOUNTS NOT ENTITLED TO PAYMENT [Section 4 (f), as amended by Section 2 of RA 9576]
Unsafe and/or unsound banking practice when it has resulted or may result in:
1. Unreasonable delay in the processing or determination of the validity of deposit claims in the event of bank closure;
or
2. Material loss or damage or abnormal risk to the bank's depositors, creditors, shareholders, or to the PDIC; or
3. Material loss or damage or abnormal risk or danger to the safety, stability, liquidity, or solvency of the bank.
G.R: The actions of the Corporation shall be final and executory, and may not be restrained or set aside by court.
XPN: The action was taken in excess of jurisdiction or with such grave abuse of discretion as to amount to a lack or
excess of jurisdiction. (The petition for certiorari may ONLY be filed within thirty (30) days from notice of denial of
claim for deposit insurance.)
EXTENT OF LIABILITY of the PDIC [Section 4 (g), as amended by Section 3 of RA 9576]
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.
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 benefits either in his own name or in the name of others.
b) Payment of an insured deposit to any person by the Corporation shall discharge the Corporation, and payment
of transferred deposit to any person by the new bank or by an insured bank in which a transferred deposit has been
made available shall discharge the Corporation and such new bank or other insured bank, tothe same extent that
payment to such person by the closed bank wouldhave discharged it from liability for the insured deposit.
(c) Except as otherwise prescribed by the Board of Directors, neither the Corporation nor such other insured
bank shall be required to recognize as the owner of any portion of a deposit appearing on the records of the closed
bank under a name other than that of the claimant, any person whose name or interest as such owner is not
disclosed on the records of such closed bank as part owner of said deposit, if such recognition would increase the
aggregate amount of the insured deposits in such closed bank.
(d) The Corporation may withhold payment of such portion of the insured deposit of any depositor in a closed bank
as may be required to provide for the payment of any liability of such depositor as a stockholder of the closed bank,
or of any liability of such depositor to the closed bank or its receiver, which is not offset against a claim due from
such bank, pending the determination and payment of such liability by such depositor or any other liable therefor.
(e) Unless otherwise waived by the Corporation, 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.
SEC. 16(b): Payment of an insured deposit to any person shall discharge PDIC, and payment of a transferred
deposit to any person by the new bank or by an insured bank in which a transferred deposit has been made
available shall discharge PDIC and such new bank or other insured bank, to the same extent that payment to such
person by the closed bank would have discharged it from liability for the insured deposit
PREFERRED CREDIT
Section 15: “xxx All payments by the Corporation of insured deposits in closed banks partake of the nature of
public funds, and as such, must be considered a preferred credit similar to taxes due to the National
Government in the order of preference under Article 2244 of the New Civil Code: Provided, further, That this
preference shall be likewise effective upon liquidation proceedings already commenced and pending as of the
approval of this Act, where no distribution of assets has been made.”
Article 2244 not only enumerates the preferred credits with respect to other property, real, and personal, of the
debtor, but also gives order of preference “in the order named.”
Note that in this article, taxes and assessments are mentioned only as Nos. 9, 10, and 11.
If the property is specific, duties, and taxes (not fees) on said property are placed as No. 1 in the order of
preference
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 or by the PDIC together with such other office, body, or agency.
UNDER THE NEW LAW, PDIC’S AUTHORITY TO EXAMINE ITS MEMBER BANKS, WITH PRIOR APPROVAL BY
THE MONETRAY BOARD HAS BEEN RESTORED.
Prior Consent for Examination – An examination of banks requires the prior consent of the Monetary Board,
whereas an investigation does not require prior MB consent
Reasons why PRIOR CONSENT of BSP NOT NECESSARY FOR INVESTIGATION:
1. Time is always of essence and it is prudent to expedite the proceedings if an accurate conclusion is to be arrived at,
as an investigation is only as precise as the evidence on which it is based;
2. An investigation is based on reports of examination and an examination is conducted with prior Monetary approval;
3. A lengthy process provide unscrupulous individuals the opportunity to cover their tracks
Authority of PDIC to condone applies only to ordinary receivables, penalties and surcharges and must be submitted
to the Commission before it is implemented. This procedure would enable the Commission to inquire into the
propriety of the condonation and to determine whether the same will not prejudice the government's interest,
consistent with COA's constitutional mandate to examine, audit and settle all accounts of the government, its
subdivisions, agencies and instrumentalities, including government-owned and controlled corporations.
Furthermore, PDIC's authority to condone under its charter is circumscribed by the phrase "to protect the interest of
the Corporation.“This authority does not include the power to condone a liability that arises from a violation of law.
With greater reason, the condonation of a liability that arise from a violation of no less than the Constitution, as in
this case, is not encompassed by PDIC's charter. It is not in the interest of PDIC to forego audit disallowances as it
is neither its mandate nor its task to perpetuate breaches of law.
Corporation 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 Incorporation and By-laws of the closed bank are likewise deemed suspended.
The assets of the closed bank under receivership shall be deemed in custodia legisin 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.
SECTION 11
In all cases or actions filed by the Corporation as receiver for the recovery of, or involving any asset of the closed
bank, payment of all docket and other court fees shall be deferred until the action is terminated with finality. Any
such fees shall constitute as a first lien on any judgment in favor of the closed bank or in case of unfavorable
judgment, such fees shall be paid as administrative expenses during the distribution of the assets of the closed
bank.
SYSTEMATIC RISK:
It refers to the possibility that failure of one bank to settle net transactions with other banks will trigger a chain
reaction, depriving other banks of funds leading to a general shutdown of normal clearing and settlement activity. It
is the likelihood of a sudden, unexpected collapse of confidence in a significant portion of the banking or financial
system with potentially large real economic effects
Corporation may not use its authority under this section to purchase the voting or common stock of an insured bank
BUT it can ENTER INTO AND ENFORCE AGREEMENTS THAT DETERMINES TO BE NECESSARY TO
PROTECT ITS FINANCIAL INTERESTS. The Financial Assistance may take the form of Equity or Quasi-Equity of
the insured bank as may be deemed necessary by the BOD with concurrence by Monetary Board, provide further
that the Corporation shall dispose of such equity as soon as practicable
• No court shall issue any temporary restraining order, preliminary injunction or preliminary mandatory injunction
against the Corporation for any action under this Act.
• Prohibition shall apply in all cases, disputes or controversies instituted by a private party, the insured bank or any
shareholder of the insured bank.
• In cases of extreme urgency, the SUPREME COURT may issue a restraining order or injunction.
• The party applying for the issuance of 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.