PDIC Law (Republic Act 3591), An Act

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MODULE 1: PDIC stability of the banking system.

PDIC
is authorized to issue regulations to
TOPIC 1: PDIC LAW (RA 3591, amended by RA 7400, implement its Charter, conduct bank
9302, and 9576, 10846) examinations and investigations to
determine banks’ financial health
and their adherence to rules and
1. What is the purpose of PDIC law?
regulations on banking and deposit
- PDIC Law (Republic Act 3591), An Act
insurance, and extend financial
Establishing the Philippine Deposit
assistance to eligible distressed
Insurance Corporation (PDIC) Defining Its
banks.
Powers and Duties and for Other Purposes,
2.3. Receiver and Liquidator of
was created on June 22, 1963 to:
distressed Banks - The PDIC is the
1.1. SECTION 1. “insure the
statutory receiver and liquidator of
deposits of all banks.”
closed banks. Upon order of the
1.2. SECTION 1. “promote and
Monetary Board of the BSP, PDIC
safeguard the interests of the
takes over closed banks; administers
depositing public by providing
their assets, records and affairs; and
insurance coverage on all insured
preserves and disposes these assets
deposits and helping maintain a
for the benefit of the closed banks’
sound and stable banking system.”
creditors. When the Monetary Board
1.3. strengthen the mandatory
orders the liquidation of a bank that
deposit insurance coverage system
has been placed under receivership,
to generate, preserve, and maintain
the assets are managed and
faith and confidence in the country’s
distributed to creditors according to
banking system, and protect it from
the preference and concurrence of
illegal schemes and machinations.
credits as provided by the Civil Code
** Mandate of PDIC of the Philippines.
- The Corporation is mandated o When liquidating the assets, you
o To provide depositor protection; realize assets into cash then
o To promote financial stability by distributed to the stockholders of
providing permanent and continuing the corporation.
deposit insurance up to the
3. What are the public policy objectives of
maximum deposit insurance
PDIC?
coverage of P500,000 per depositor - PDIC was created to:
per bank (This used to be P100,000 (a) “promote and safeguard the interests of
only). the depositing public by way of
2. What are the main functions of PDIC? providing permanent and continuing
- Consistent with its public policy objectives, insurance coverage on all insured
the PDIC has the following mandates: deposits.”
2.1. Deposit Insurer - The (b) to strengthen the mandatory deposit
Corporation provides maximum insurance coverage system to generate,
deposit insurance coverage of preserve, and maintain faith and
Php500,000. Member-banks are confidence in the country’s banking
assessed annually at a flat rate of system, and protect it from illegal
1/5 of 1% of their total deposit schemes and machinations.
liabilities. The assessments are
**2 Public Policy Objectives of PDIC
collected from member-banks semi-
1) Depositor Protection – to promote and
annually and form part of PDIC’s
safeguard the interests of the depositing
Deposit Insurance Fund (DIF).
public by way of providing permanent and
2.2. Co-regulator of the BSP
continuing insurance coverage on all
over Banking Institution - The PDIC
insured deposits.
works closely with the Bangko
2) Financial stability – to strengthen the
Sentral ng Pilipinas (BSP) in
mandatory deposit insurance coverage
strengthening and maintaining the
system to generate, preserve, and maintain maintains a branch outside
faith and confidence in the country’s the Philippines may elect to
banking system, and protect it from illegal include for insurance its
schemes and machinations. deposit obligations payable
only at such branch.
**Is it compulsory to insure the deposits of the
o The corporation shall not pay
banks? Are the banks mandated/compelled to
deposit insurance for the following
insure the deposits?
accounts or transactions:
- Yes. For every account every month, the  Investment products such as
bank allocates a certain sum that insures a bonds and securities, trust
certain percentage to be deposited to PDIC. accounts, and other similar
There’s like a sort of amortization every instruments;
month. So every month, banks are  Deposit accounts or
mandated to deposit with PDIC a certain transactions which are
sum to insure all of the accounts in its bank, fictitious or fraudulent as
which will be used by PDIC in the event that determined by the
the bank will go bankrupt and there will be Corporation;
claims and they will use it to pay the  Deposit accounts or
depositors but only up to P500,000. transactions constituting,
and/or emanating from,
4. Define
unsafe and unsound banking
(a) Deposit
practice/s, as determined by
o The term deposit means the unpaid
the Corporation, in
balance of money or its equivalent
consultation with the Bangko
received by a bank in the usual
Sentral ng Pilipinas, after due
course of business and for which it
notice and hearing, and
has given or is obliged to give credit
publication of a directive to
to a commercial, checking, savings,
cease and desist issued by
time or thrift account, evidenced by
the Corporation against such
a passbook, certificate of deposit, or
deposit accounts,
other evidence of deposit issued in
transactions or practices;
accordance with Bangko Sentral ng
and
Pilipinas rules and regulations and
 Deposits that are determined
other applicable laws, together with
to be the proceeds of an
such other obligations of a bank,
unlawful activity as defined
which, consistent with banking
under Republic Act No. 9160,
usage and practices, the Board of
as amended.
Directors shall determine and
o The actions of the Corporation taken
prescribe by regulations to be
under Section 5(g) shall be final and
deposit liabilities of the bank:
executory, and may only be
 Provided, that any obligation
restrained or set aside by the Court
of a bank which is payable at
of Appeals, upon appropriate
the office of the bank located
petition for certiorari on the ground
outside of the Philippines
that the action was taken in excess
shall not be a deposit for any
of jurisdiction or with such grave
of the purposes of this Act or
abuse of discretion as to amount to
included as part of the total
a lack or excess of jurisdiction. The
deposits or of insured
petition for certiorari may only be
deposit:
filed within thirty (30) days from
 Provided, further, that
notice of denial of claim for deposit
subject to the approval of the
insurance.
Board of Directors, any
insured bank which is ** Is deposit a payable or a receivable of the bank?
incorporated under the laws - It is a payable/obligation of the bank. It is
of the Philippines which payable upon demand/withdraw money.
** What’s the relationship of the depositor and the different combinations of
bank? individuals, juridical persons
- The bank is the debtor, and the depositor is or entities, shall likewise be
the creditor. subject to the maximum
- Any insured bank, which is incorporated insured deposit of Five
under the laws of the Philippines, they can Hundred Thousand Pesos
claim. (P500,000.00):
(b) Insured deposit  Provided, furthermore, That
o The term insured deposit means the the provisions of any law to
amount due to any bonafide the contrary
depositor for legitimate deposits in notwithstanding, no
an insured bank as of the date of owner/holder of any
closure but not to exceed Five passbook, certificate of
hundred thousand pesos deposit, or other evidence of
(P500,000.00). Such amount shall be deposit shall be recognized
determined according to such as a depositor entitled to the
regulations as the Board of Directors rights provided in this Act
may prescribe. In determining such unless the passbook,
amount due to any depositor, there certificate of deposit, or
shall be added together all deposits other evidence of deposit is
in the bank maintained in the same determined by the
right and capacity for his benefit Corporation to be an
either in his own name or in the authentic document or
name of others. A joint account record of the issuing bank:
regardless of whether the  Provided, finally, That in
conjunction “and,” “or,” “and/or” is case of a condition that
used, shall be insured separately threatens the monetary and
from any individually-owned deposit financial stability of the
account: banking system that may
 Provided, That (1) If the have systemic consequences,
account is held jointly by two as defined in Section 22
or more natural persons, or hereof, as determined by the
by two or more juridical Monetary Board, the
persons or entities, the maximum deposit insurance
maximum insured deposit cover may be adjusted in
shall be divided into as many such amount, for such a
equal shares as there are period, and/or for such
individuals, juridical persons deposit products, as may be
or entities, unless a different determined by a unanimous
sharing is stipulated in the vote of the Board of
document of deposit, and (2) Directors in a meeting called
if the account is held by a for the purpose and chaired
juridical person or entity by the Secretary of Finance,
jointly with one or more subject to the approval of the
natural persons, the President of the Philippines.
maximum insured deposit
** Does it include foreign currency denominated
shall be presumed to belong
deposits?
entirely to such juridical
- Yes
person or entity:
 Provided, further, That the ** Can this be adjusted upward or downward?
aggregate of the interest of - Yes, which may be determined by a
each co-owner over several unanimous vote of the BOD of the
joint accounts, whether Monetary Board of the Central Bank called
owned by the same or for the purpose and chaired by the
Secretary of Finance, subject to the same right and capacity shall be added
approval of the President of the Philippines. together. A joint account shall be insured
separately from any individually-owned
5. What is the maximum deposit insurance
deposit account.
coverage?
- PDIC shall pay deposit insurance on all valid - Insured Deposits:
deposits up to the Maximum Deposit (a) By Deposit Type
Insurance Coverage of Php500,000, per o Savings
depositor, of a closed bank. Accounts o Special Savings
maintained in the same right and capacity o Demand/Checking
for a depositor’s benefit, whether in his own o Negotiable Order of Withdrawal
name or in the name of others, are covered (NOW)
by deposit insurance. Deposits are o Certificate of Time Deposits
considered valid upon the determination by (b) By Deposit Account
the PDIC, based on bank records, that the o Single Account
deposits were made with a corresponding o Joint Account
inflow of cash. o Account “By”, “In Trust For” (ITF) or
“For the Account of” (FAO) another
** For the purposes of computing deposit
person
insurance, how is this being computed?
(c) By Currency
- In determining such amount due to any
o Philippine peso
depositor, there shall be added together all
o Foreign currencies considered as
deposits in the bank maintained in the same
part of the BSP’s international
right and capacity for his benefit either in
reserves
his own name or in the name of others.
** Can you deposit yen, won, dirham, dinar to any
** When do you consider a deposit to be valid?
bank of the Philippines?
- Deposits are considered valid upon the
- No. Only EURO and DOLLARS.
determination by the PDIC, based on bank
records, that the deposits were made with a 7. Definition of accounts
corresponding inflow of cash. (a) Single accounts
o are individually-owned accounts or
** Which banks are considered members of the
accounts held under one name,
PDIC?
either as natural person or juridical
- Banks are corporations. If you want to
entity.
operate a bank, there must be a secondary
 Natural Person refers to any
license from BSP (the regulator of the
individual person. Single
banks, pawnshops, lending institutions, and
proprietors are considered
forex entities). Banks must be authorized by
natural persons.
BSP to perform banking functions in the
 Juridical entity refers to a
Philippines.
corporation, partnership or
- Banks incorporated under Philippine law,
cooperative (including
such as commercial, savings, mortgage,
registered associations).
development, rural and cooperative banks,
o are accounts maintained solely by a
as well as stock savings and loan
depositor (natural person or juridical
associations, they are member banks of
entity/organization). In-Trust-For
PDIC, including domestic branches of
(ITF) and By Accounts are also
foreign banks.
considered single accounts. In the
6. What are covered by PDIC deposit case of account name: (1) Maria ITF
insurance? Jose; or, (2) Jose By Maria, the
- PDIC provides a maximum deposit insurance owner is Jose for both accounts.
coverage of PhP500,000 per depositor per (b) Joint accounts
bank. It covers all types of bank deposits in o are accounts held under more than
banks whether denominated in local or one name.
foreign currencies. All deposit accounts of a o Accounts held jointly by two or more
depositor in a closed bank maintained in the persons/juridical persons/entities.
o A joint account regardless of Trust For” accounts, the
whether the conjunction “and”, “or” consolidated balances of these
or “and/or” is used shall be insured accounts shall be insured up to
separately from single accounts. Php500,000.
o Unless a different sharing is o The depositor’s total shares in
stipulated in the deposit documents, his/her joint accounts shall be
the insured amount up to the separately insured up to
Maximum Deposit Insurance Php500,000.
Coverage of Php500,000 shall be o A depositor with single accounts and
divided equally between or among joint accounts may have insured
co-owners of a joint account. deposits of up to Php1,000,000.
o The total shares of a co-owner in
** In an account with combined joined and
several joint accounts may exceed
FAO/ITF, who is the depositor? (ex. XU and/or Fr.
Php500,000 but will only be insured
Mars Tan ITF Fr. Bobby)
up to the Maximum Deposit
- Fr. Bobby is the depositor.
Insurance Coverage of Php500,000.
o Joint accounts held in the names of 8. What are the rules in determining accounts
a juridical entity and a natural covered?
person shall be presumed to belong (a) Single Accounts / Sole Proprietorship / ”By”
solely to the juridical entity. Accounts/ “ITF” Accounts - In determining
such amount due to any depositor, there
** And joint accounts shall be added together all deposits in the
- Both of them should sign the withdrawal bank maintained in the same right and
slip. capacity for his benefit either in his own
** Or joint accounts name or in the name of others. Single
- Any one of the signatories. accounts are insured separately from joint
accounts up to the Maximum Deposit
** Are joint accounts insured separately from Insurance Coverage of P500,000.
single accounts? (b) Joint Accounts - A joint account regardless
- Yes. of whether the conjunction "and", "or",
** Sharing in the deposit of the insurance "and/or" is used, shall be insured separately
- It is divided equally between or among the from any individually-owned deposit
co-owners of the joint account. account/s.
- If the account is held jointly by two or
**What’s the total share of a co-owner of a several more natural persons, or by two or more
account? Can it exceed P500,000? juridical persons or entities, the maximum
- It will only be insured up to the mandatory insured deposit shall be divided into as
deposit insurance coverage of P500,000. many equal shares as there are individuals,
** Joint accounts held in the name of a juridical juridical person or entities, unless a different
entity (ex. Xavier University and Fr. Mars Tan) sharing is stipulated in the document of
- It is presumed by the juridical entity. deposit.
- If the account is held by a juridical person
(c) “By”, “ITF” or “FAO” accounts or entity jointly with one or more natural
o In a “By” account, Ana by Ben, Ana persons, the maximum insured deposit shall
is the depositor. be presumed to belong entirely to such
o In an “In Trust For” (ITF) account, juridical person or entity.
Ana In Trust For Ben, Ben is the - The aggregate of the interests of each co-
depositor. owner over several joint accounts, whether
o In a “For the Account of” (FAO) owned by the same or different
account, Ana For the Account of combinations, shall likewise be subject to
Ben, Ben is the depositor. the Maximum Deposit Insurance Coverage
o In the case where a depositor is the of P500,000.
sole beneficial owner of a single,
“For the Account of”, “By”, and “In
9. What is compensation or set-off in relation 10. Requirements for Claims
to computing insured deposits? - Depositors with valid deposit accounts with
a) Any amount netted out from the deposit balances of P100,000.00 and below are not
and/or such amount in excess of the maximum required to file claims, provided they: (1) have
deposit insurance coverage (MDIC) shall be no obligations with the closed bank, or have not
considered as uninsured deposit which shall be acted as co-makers of these obligations, or are
a claim against the assets of the closed bank. not spouses of the borrowers; (2) have
b) The uninsured deposit maybe applied as complete mailing address found in the bank
payment to or deducted from the obligations records or have updated their addresses
referred to in Section 4 hereof. through the Mailing Address Update Form
(MAUF) of PDIC before the start of the onsite
- Section 4. Obligations for Net Out
claims settlement operation; and (3) have not
The following shall be netted out from the
maintained the account under the name of
depositor's total deposits with the closed bank:
business entities. Postal Money Orders are sent
a. Loan obligations with the closed bank as
to these depositors at their respective mailing
principal debtor or as co-maker;
addresses found in the bank records or
b. Loan obligations with the closed bank
indicated in the MAUF
where the depositor acts as surety and
** These accounts are illegible for early payment,
the obligation has become past due or
not claim. Those who are over P100,000, that’s the
demandable against the surety by virtue
time you have to claim.
of the principal debtor's default prior to
or at the time of the bank's closure; **When would you file your claim?
c. Loan obligations of the depositor's - Claims should be filed within the two-year
spouse with the closed bank where the prescriptive period after PDIC's takeover of
loan obligation is contracted by the said the closed bank. The PDIC will not accept
spouse as the designated administrator- claims that are incomplete or lacking in
spouse of the Absolute Community of requirements. The PDIC may also require
Property or Conjugal Partnership of additional documents in the course of
Gains, or with the consent of other claims processing.
spouse; ** For example nag take-over in January 2021 sa
d. Money accountability of the depositor distressed and closed bank si PDIC, until when can
who is a director, officer, stockholder or files be claimed regarding settlements?
employee of the closed bank; - December 31, 2022.
e. Other sums due or owing to the closed (a) Who are required to file claims?
bank from the depositor. Depositors:
o With valid deposit accounts with
- Section 5 Effect of Net Out
balances of more than P100,000;
a. Any amount netted out from the
o With outstanding obligations with
deposit and/or such amount in excess of the
maximum deposit insurance coverage the closed bank either as borrower,
(MDIC) shall be considered as uninsured co-maker, or as spouse of borrower;
deposit which shall be a claim against the o With incomplete mailing address
assets of the closed bank. found in the bank records, or failed
b. The uninsured deposit maybe to update them through the MAUF
applied as payment to or deducted from the issued by the PDIC;
obligations referred to in Section 4 hereof. o With accounts maintained under the
name of business entities;
** Mr.Tuhod has an account with ABC Bank with an o With accounts not eligible for early
amount of P1M and he has a car loan with a payment, regardless of type of
balance of P500,000 (financed by ABC Bank). What account and account balance per
can be done? Can set-off be implemented? Can the advice of PDIC; and
bank deduct from the account of Mr. Tuhod his o Who are deceased whose filing of
loan obligation? claim is thru the legal heirs.
- Yes (b) What are the documents required in
support of the claim?
o ORIGINAL EVIDENCE OF DEPOSITS (c) Who should sign the Claim Form?
such as savings passbook, certificate o DEPOSITOR of the account for
of time deposit, bank statement, depositor 18 years old and above
used or unused checks, or ATM card. o PARENT of depositor below 18 years
o ONE (1) VALID ORIGINAL PHOTO- old
BEARING IDENTIFICATION o AGENT in the case of "by" account
DOCUMENT (ID) with clear signature o TRUSTEE in the case of "In Trust for
of depositor/claimant (e.g., Driver's (ITF)" account
License, SSS/GSIS ID, Senior Citizen's o EACH DEPOSITOR / ACCOUNT
ID, Passport, PRC ID, OWWA/OFW HOLDER for account maintained as
ID, Seaman's ID, Alien Certificate of "Or", "And/Or" or "And" in the case
Registration ID, Voter's ID). (IT IS of joint accounts
RECOMMENDED TO BRING AT LEAST o AUTHORIZED REPRESENTATIVE/s
TWO (2) VALID IDs IN CASE OF for business entities, deceased
DISCREPANCIES IN SIGNATURE). depositors and person who has
o For depositors below eighteen (18) Special Power of Attorney (SPA)
years old, photocopy of birth from the depositor.
certificate from the Philippine
11. What are not covered by PDIC deposit
Statistics Authority (PSA) or a duly
insurance?
certified copy issued by the local civil
- The following, whether denominated,
registrar, and valid ID of the parent.
documented, recorded or booked as deposit
o Original copy of a notarized Special
by the bank, are excluded from PDIC
Power of Attorney (SPA) for
deposit insurance (Section 4 (f) of the PDIC
claimants who are not the
Charter):
signatories in the bank records. In
o Investment products such as bonds and
the case of minor depositor, the SPA
securities, trust accounts and other
must be executed by the parent.
similar instruments
(please click to download the sample
o Deposit accounts or transactions that:
Form of SPA).
o Are unfunded, fictitious, or
o Claim Form:
fraudulent
o When filing claim during the
o Constitute and/or emanate from
onsite CSO period, or during
unsafe and unsound banking
personal filing at the PDIC
practices as determined by the
PAC, a system generated
PDIC, in consultation with the
Claim Form shall be printed
BSP, after the due notice and
by PDIC representative after
hearing and publication of
interview/processing.
PDIC’s cease and desist order
o When filing through mail,
against such deposit
please download the PDIC
accounts/transactions.
Claim Form. (please click to
o Are determined to be proceeds
download the Claim Form,)
of an unlawful activity as defined
The claim form needs to be
in the Anti- Money Laundering
accomplished, signed, and
Act (RA 9160, as amended)
notarized. Depositors must
- Unsafe and unsound deposit-related
ensure that the signature on
activities, among others: (PDIC Regulatory
the Claim Form is similar
Issuance No. 2011.01)
with the signature in the
o Deposit-related
bank records and the valid
practice/activity/transaction without
IDs submitted.
the approval or adequate controls
** For those who are not around in the
required under existing laws, rules and
Philippines?
regulations
- Original copy of a notarized Special Power
o Failure to keep bank records within bank
of Attorney (SPA) for claimants who are not
premises
the signatories in the bank records.
o Granting high interest rates, when bank
has: (1) negative unimpaired capital, or
(2) liquid assets to deposit ratio less
than 10%
o Non-compliance with PDIC regulations

** Is splitting of deposits allowed?


- Yes, this occurs whenever a deposit
account/s with an outstanding balance of
more than the statutory maximum amount
of insured deposit maintained under the
name of a natural or juridical person/s
is/are broken down and transferred into
two or more accounts in the name/s of
natural or juridical person/s or
entity/entities who have no beneficial
ownership on transferred deposits in their
names within one hundred twenty (120)
days immediately preceding or during a
bank-declared bank holiday, or immediately
preceding a closure order issued by the
Monetary Board of the Bangko Sentral ng
Pilipinas (BSP) for the purpose of availing of
the maximum deposit insurance coverage.

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