REPUBLIC ACT NO.

 10846 - PDIC

AN ACT ENHANCING THE RESOLUTION AND LIQUIDATION FRAMEWORK

FOR BANKS, AMENDING FOR THE PURPOSE REPUBLIC ACT NO. 3591,
AS AMENDED, AND OTHER RELATED LAWS

SECTION 1. Section 1 of Republic Act No. 3591, as amended, is hereby

amended to read as follows:

“THE CREATION OF THE PHILIPPINE

DEPOSIT INSURANCE CORPORATION

“SECTION 1. — There is hereby created a Philippine Deposit Insurance

Corporation hereinafter referred to as the ‘Corporation’ which shall insure as
herein provided, the deposits of all banks which are entitled to the benefits of
insurance under this Act, and which shall have the powers hereinafter granted.

“The Corporation shall, as a basic policy, promote and safeguard the interests
of the depositing public by providing insurance coverage on all insured
deposits and helping maintain a sound and stable banking system.”

SEC. 2. A new section entitled Section 2 of the same Act shall be inserted
between Sections 1 and 3 which shall read as follows:

“STATE POLICY

“SEC. 2. — It is hereby declared to be the policy of the State to strengthen the

mandatory deposit insurance coverage system to generate, preserve, maintain
faith and confidence in the country’s banking system, and protect it from illegal
schemes and machinations.

“Towards this end, the government must extend all means and mechanisms
necessary for the Corporation to effectively fulfill its vital task of promoting and
safeguarding the interests of the depositing public by way of providing
insurance coverage on bank deposits and in helping develop a sound and
stable banking system.

“In view of the crucial role and the nature of its functions and responsibilities,
the Corporation, while being a government instrumentality with corporate
powers, shall enjoy fiscal and administrative autonomy.”

SEC. 3. Section 2 of the same Act is accordingly renumbered as Section 3 and

is hereby amended to read as follows:

“BOARD OF DIRECTORS: COMPOSITION

AND AUTHORITY (NOT PRINTED)

SEC. 7. Section 4 of the same Act is accordingly renumbered as Section 5,

and is hereby amended to read as follows:

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 “DEFINITION OF TERMS (Partial Print)

“SEC. 5. As used in this Act –

“(a) The term asset refers to movable, immovable, tangible, or intangible

resources or properties over which a bank has an established or equitable
interest …

“(b) The term asset distribution plan refers to the plan of distribution of the

assets of a closed bank to its creditors, based on its estimated realizable value
…

“(c) The term Board of Directors means the Board of Directors of the

Corporation.

“(d) The term bank and banking institution shall be synonymous and

interchangeable and shall include banks, commercial banks, savings banks,
mortgage banks, rural banks, development banks, cooperative banks, …

“(e) The term closed bank refers to a bank placed under liquidation by the

Monetary Board.

“(f) The term creditor refers to any individual or entity with a valid claim against
the assets of the closed bank.

“(g) The term deposit means the unpaid balance of money or its equivalent

received by a bank in the usual course of business and for which it has given
or is obliged to give credit to a commercial, checking, savings, time or thrift
account, evidenced by a passbook, certificate of deposit, or other evidence of
deposit issued in accordance with Bangko Sentral ng Pilipinas rules …

“The Corporation shall not pay deposit insurance for the following accounts
or transactions:

“(1) Investment products such as bonds and securities, trust accounts, and
other similar instruments;

“(2) Deposit accounts or transactions which are fictitious or fraudulent as

determined by the Corporation;

“(3) Deposit accounts or transactions constituting, and/or emanating from,

unsafe and unsound banking practice/s, as determined by the Corporation, in
consultation with the Bangko Sentral ng Pilipinas, … and

“(4) Deposits that are determined to be the proceeds of an unlawful activity as

defined under Republic Act No. 9160, as amended.

“(h) The term disputed claim refers to a claim or suit against the assets of a

closed bank, or for specific performance, or breach of contract, or damages, of
whatever nature or character, whether for money or otherwise, liquidated or
unliquidated, fixed or contingent, matured or current, denied by the receiver.

“(i) The term insured bank means any bank the deposits of which are insured
in accordance with the provisions of this Act.

“(j) The term insured deposit means the amount due to

any bonafide depositor for legitimate deposits in an insured bank as of the date
of closure but not to exceed Five hundred thousand pesos (P500,000.00).
Such amount shall be determined according to such regulations as the Board
of Directors may prescribe. 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 or her benefit either in his or her own name or in the
name of others. 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 (1) 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 (2) 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: Provided, further, 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 passbook, certificate of
deposit, or other evidence of deposit shall be recognized as a depositor
entitled to the rights provided in this Act unless the passbook, certificate of
deposit, or other evidence of deposit is determined by the Corporation to be an
authentic document or record 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
22 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.

“(k) The term liquidation refers to the proceedings under Sections 12 to 16 of

this Act.

“(1) The term liquidation court refers to the Regional Trial Court (RTC) of

general jurisdiction where the petition for assistance in the liquidation of a
closed bank is filed and given due course.

“(m) The term payout refers to the payment of insured deposits.

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“(n) The term petition for assistance in the liquidation of a closed bank refers to
the petition filed by the receiver with the RTC in accordance with Section 16 of
this Act.

“(o) The term purchase of assets and assumption of liabilities refers to a

transaction where an insured bank purchases any or all assets and assumes
any or all liabilities of another bank under resolution or liquidation, as provided
in this Act.

“(p) The term receiver refers to the Corporation or any of its duly authorized

agents acting as receiver of a closed bank.

“(q) The term records include all documents, titles, papers and electronic data
of the closed bank, including those pertaining to deposit accounts of and with
the closed bank, its assets, transactions and corporate affairs.

“(r) The term residual assets refer to assets, in cash or in kind, to be turned

over to the closed bank’s stockholders of record, in proportion to their interest
in the closed bank as of date of closure, after payment in full of liquidation
costs, fees and expenses, and the valid claims and surplus dividends to all the
creditors.

“(s) The term resolution refers to the actions undertaken by the Corporation

under Section 11 of this Act to:

“(1) Protect depositors, creditors and the DIF;

“(2) Safeguard the continuity of essential banking services or maintain financial

stability; and

“(3) Prevent deterioration or dissipation of bank assets.

“(t) The term risk-based assessment system pertains to a method for

calculating an insured bank’s assessment on the probability that the DIF will
incur a loss with respect to the bank, and the likely amount of any such loss,
based on its risk rating that takes into consideration the following:

“(1) Quality and concentration of assets;

“(2) Categories and concentration of liabilities, both insured and uninsured,

contingent and noncontingent;

“(3) Capital position;

“(4) Liquidity position;

“(5) Management and governance; and

“(6) Other factors relevant to assessing such probability, as may be determined

by the Corporation:
“(u) The term statement of affairs refers to a report of financial condition of the
closed bank at a given date, showing the: (1) estimated realizable value of
assets; (2) classification of credits; and (3) estimated liabilities to be settled.

“(v) The term surplus dividends refers to the remaining assets of the closed

bank after satisfaction in full of all the liquidation costs, fees and expenses, and
valid claims. The surplus dividends shall be computed at the legal rate of
interest from the date of takeover to cut-off date of the distribution plan, and
shall be paid, in cash or in kind, to creditors of the closed bank in accordance
with the Rules on Concurrence and Preference of Credits under the Civil Code
or other laws.

“(w) The term takeover refers to the act of physically taking possession and

control of the premises, assets and affairs of a closed bank for the purpose of
liquidating the bank.

“(x) The term transfer deposit means, a deposit in an insured bank made

available to a depositor by the Corporation as payment of insured deposit of
such depositor in a closed bank and assumed by another insured bank.

“(y) The term trust funds means funds held by an insured bank in a fiduciary

capacity and includes without being limited to, funds held as trustee, executor,
administrator, guardian or agent.

“(z) The term valid claim refers to the claim recognized by the receiver or

allowed by the liquidation court.

“(aa) The term winding up period refers to the period provided in Section 16 of

this Act.”

SEC. 8. Section 5 of the same Act is accordingly renumbered as Section 6,

and is hereby amended to read as follows:

“DEPOSIT INSURANCE COVERAGE

“SEC. 6. The deposit liabilities of any bank 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.

“Whenever a bank is determined by the Bangko Sentral 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. 9. Section 6 of the same Act is accordingly renumbered as Section 7.

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SEC. 10. Section 7 paragraph (a) of the same Act, as renumbered, is hereby
amended to read as follows:

“ASSESSMENT OF MEMBER BANKS” (Not Printed)

SEC. 13. Section 7 of the same Act is accordingly renumbered as Section 8,

and is hereby amended to read as follows:

“SANCTIONS AGAINST UNSAFE AND

UNSOUND BANKING PRACTICES (Partially Printed only)

“The deposits of each depositor in the bank on the effective date of the
termination of insurance coverage, less all subsequent withdrawals, shall
continue to be insured up to the maximum deposit insurance coverage for a
period of one hundred eighty (180) days. Additions to, or renewal of, existing
deposits and new deposits in such bank after the effective date of termination
of insured status of the bank shall not be insured by the Corporation.

SEC. 14. Section 8 of the same Act is accordingly renumbered as Section 9.

SEC. 15. Section 9, paragraph Twelfth of the same Act, as renumbered, is

hereby amended to read as follows: (Not Printed: Section 15-19; 21-22)

SEC. 20. Section 10 paragraph (d-1) of the same Act, as renumbered, is

hereby amended to read as follows:

“(d-1) Each insured bank shall keep and maintain a true and accurate record or
statement of its daily deposit transactions consistent with the standards set by
the Bangko Sentral ng Pilipinas and the Corporation. Compliance with such
standards shall be duly certified by the president of the bank and the
compliance officer: Provided, That refusal or willful failure to issue the required
certification shall constitute a violation of this section and shall subject such
officers of the bank to the sanctions provided for under Section 26(f) of this
Act.”

SEC. 23. A new section entitled Section 11 of the same Act is hereby inserted
between Sections 10 and 12 which shall read as follows:

“BANK RESOLUTION

“SEC. 11. (a) The Corporation, in coordination with the Bangko Sentral ng
Pilipinas, may commence the resolution of a bank under this section upon:

“(1) Failure of prompt corrective action as declared by the Monetary Board; or

“(2) Request by a bank to be placed under resolution.

“The Corporation shall inform the hank of its eligibility for entry into resolution.

“(b) The Bangko Sentral ng Pilipinas shall inform the Corporation of the
initiation of prompt corrective action on any bank and shall be authorized to
share with the Corporation all information, agreements or documents, including
any order of the Monetary Board, in relation to the prompt corrective action.
The Corporation shall have the authority to inquire and monitor the status of
banks under prompt corrective action.

“(c) When there is a failure of prompt corrective action as declared by the

Monetary Board due to capital deficiency, the Corporation, its duly authorized
officers or employees, may examine, inquire or look into the deposit records of
a bank: Provided, That such authority may not be exercised when the failure of
prompt corrective action is due to grounds other than capital deficiency. For
this purpose, banks, their officers and employees are hereby mandated to
disclose and report to the Corporation or its duly authorized officers and
employees, deposit account information in said bank.

“The Corporation, its duly authorized officers or employees are prohibited from
disclosing information obtained under this section to any person, government
official, bureau or office. Any act done pursuant to this section shall not be
deemed as a violation of Republic Act No. 1405, as amended, Republic Act
No. 6426, as amended, Republic Act No. 8791, and other similar laws
protecting or safeguarding the secrecy or confidentiality of bank
deposits: Provided, That any unauthorized disclosure of the information under
this section shall be subject to the same penalty under the foregoing laws
protecting the secrecy or confidentiality of bank deposits.

“(d) The stockholders, directors, officers or employees of the bank shall have
the following obligations: (Not Printed)

SEC. 25. A new section entitled Section 12 of the same Act is hereby inserted
between Sections 11 and 13 which shall read as follows:

“LIQUIDATION OF A CLOSED BANK

“SEC. 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.”

SEC. 26. A new section entitled Section 13 of the same Act is hereby inserted
between Sections 12 and 14 which shall read as follows: (Not Printed)

SEC. 27. A new section entitled Section 14 of the same Act is hereby inserted
between Sections 13 and 15 which shall read as follows:

“NOTICE OF CLOSURE AND

TAKEOVER ACTIVITIES (Not Printed)

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SEC. 28. A new section entitled Section 15 of the same Act is hereby inserted
between Sections 14 and 16 which shall read as follows:

“PURCHASE OF ASSETS AND

ASSUMPTION OF LIABILITIES (Not Printed)

SEC. 29. A new section entitled Section 16 of the same Act is hereby inserted
between Sections 15 and 17 which shall read as follows:

“CONVENTIONAL LIQUIDATION

“A. ASSET MANAGEMENT AND CONVERSION (Not Printed)

“C. WINDING-UP

“(q) The creditors shall have a period of six (6) months from the date of
publication of notice of the approval by the court of the final asset distribution
plan of the closed bank within which to claim payment of the principal
obligations and surplus dividends. During this six-month period, the receiver
shall hold as trustee the assets allocated in the final asset distribution plan for
said creditors.

“Failure by the creditor to comply with the documentary requirements within the
prescribed period and/or refusal to accept the asset as payment shall be
deemed as abandonment or waiver of his or her right to payment.

“(r) The individual stockholders of record or their duly-authorized representative

or the court-appointed stockholders’ representative shall have a period of six
(6) months from publication of notice of the approval by the court of the final
asset distribution plan of the closed bank within which to claim the residual
assets. During this six-month period, the receiver shall hold as trustee the
assets allocated in the final asset distribution plan for said stockholders of
record.

“Failure by the individual stockholders of record or their duly-authorized

representative or the court-appointed stockholders’ representative to comply
with the documentary requirements within the prescribed period and/or refusal
to accept the residual assets in kind shall be deemed as abandonment or
waiver of right to receive the residual assets.

“(s) After the lapse of the six-month period provided in paragraphs (q) and (r) of
this section, all assets which remain unclaimed by the creditors and/or
stockholders of record shall be turned over to the Bureau of Treasury.

“(t) The receiver shall continue to keep all the pertinent records of the closed
bank for a period of six (6) months from the date of publication of the approval
of the final asset distribution plan.

After the lapse of this period, the receiver is authorized to dispose of the same
in accordance with the rules and regulations to be prescribed by the receiver.”
SEC. 30. Section 13 of the same Act is hereby renumbered as Section 17.

SEC. 31. A new section entitled Section 18 of the same Act is hereby inserted
between Sections 17 and 19 which shall read as follows:

“DIVIDEND DECLARATION (Not Printed)

SEC. 32. Section 14 of the same Act is accordingly renumbered as Section 19

and is hereby amended to read as follows:

“PAYMENT OF INSURED DEPOSITS

“SEC. 19. Whenever an insured bank shall have been closed by the Monetary
Board pursuant to Section 30 of Republic Act No. 7653, or upon expiration or
revocation of a bank’s corporate term, payment of the insured deposits on such
closed bank shall be made by the Corporation 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: Provided, however, That the Corporation, in its discretion, may
require proof of claims to be filed before paying the insured deposits, and that
in any case where the Corporation is not satisfied as to the validity of a claim
for an insured deposit, it may require final determination of a court of
competent jurisdiction before paying such claim: Provided, further, That 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 Corporation responsible for the delay, to
imprisonment from six (6) months to one (1) year: Provided, furthermore, That
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 Corporation together with such other
office, body or agency.”

SEC. 33. Section 15 of the same Act is accordingly renumbered as Section 20

and is hereby amended to read as follows:

“SEC. 20. The Corporation, upon payment of any depositor as provided for in
Section 19 of this Act, shall be subrogated to all rights of the depositor against
the closed bank to the extent of such payment. Such subrogation shall include
the right on the part of the Corporation to receive the same dividends and
payments from the proceeds of the assets of such closed bank and recoveries
on account of stockholders’ liability as would have been payable to the
depositor on a claim for the insured deposits: Provided, That such depositor
shall retain his or her claim for any uninsured portion of his or her deposit,
which legal preference shall be the same as that of the subrogated claim of the
Corporation for its payment of insured deposits. 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 in the order of
preference under Article 2244 (9) of the New Civil Code.”
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SEC. 34. Section 16 of the same Act is accordingly renumbered as Section 21
and paragraph (c) thereof is hereby amended to read as follows:

“(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 evidenced by a passbook, certificate of
deposit or other evidence of deposit determined by the Corporation to be an
authentic document or record 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 passbook, certificate of deposit or other evidence of deposit 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.”

SEC. 35. Section 17 of the same Act is accordingly renumbered as Section 22.

SEC. 36. Section 22 paragraph (a) of the same Act, as renumbered, is hereby
amended to read as follows:

“CORPORATE FUNDS AND ASSETS (Not Printed)

SEC. 37. Section 22 paragraph (b) of the same Act, as renumbered, is hereby
amended to read as follows:

“(b) The banking or checking accounts of the Corporation shall be kept with the
Bangko Sentral ng Pilipinas, or with any other bank designated as depository
or fiscal agent of the Philippine government.”

SEC. 38. An additional paragraph to Section 22 of the same Act, as

renumbered, is hereby inserted after paragraph (c) which shall read as follows:

“(d) Assets of the Corporation shall be exempt from attachment, garnishment

or any other order or process of any court, agency or any other administrative
body.”

SEC. 39. Section 17 paragraph (d) of the same Act is accordingly renumbered
as Section 22 paragraph (e) and is hereby amended to read as follows:

“FINANCIAL ASSISTANCE (Not Printed)

SEC. 40. Section 18 of the same Act is accordingly renumbered as Section 23

and is hereby amended to read as follows:

“AUTHORITY TO BORROW (Not Printed)

SEC. 41. Section 19 of the same Act is accordingly renumbered as Section 24

and is hereby amended to read as follows:

“ISSUANCE OF BONDS, DEBENTURES

AND OTHER OBLIGATIONS (Not Printed)

SEC. 42. Section 20 of the same Act is accordingly renumbered as Section 25.
SEC. 43. Section 21 of the same Act is accordingly renumbered as Section 26.

SEC. 44. Section 26 paragraph (f) of the same Act, as renumbered, is hereby
amended to read as follows: Penalties to be imposed to erring bank officers
(Not Printed)

SEC. 45. Additional paragraphs to Section 26 of the same Act, as renumbered,

are hereby inserted after paragraph (g) which shall read as follows:

“(h) The penalty of imprisonment of not less than ten (10) years but not more
than twelve (12) years, or a fine of not less than Five hundred thousand pesos
(P500,000.00) but not more than Ten million pesos (P 10,000,000.00), or both,
at the discretion of the court, shall be imposed upon:

“(1) Any depositor who files a fictitious and/or fraudulent claim for deposit
insurance; and

“(2) Any bank officer who certifies to the validity of the deposit liabilities which
is subsequently verified to be fictitious and/or fraudulent.

(List of other penalties Not Printed)

SEC. 52. Separability Clause. – If any provision or section of this Act or the

application thereof to any person or circumstances is held invalid, the other
provisions or sections of this Act, in the application of such provision or section
to other persons or circumstances, shall not be affected thereby.

SEC. 53. Repealing Clause. – All acts or parts of acts and executive orders,
administrative orders, or parts thereof which are inconsistent with the
provisions of this Act are hereby repealed.

SEC. 54. Effectivity Clause. – This Act shall take effect fifteen (15) days
following the completion of its publication in the Official Gazette or in two (2)
newspapers of general circulation.

Approved: MAY 23 2016

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