Philippine Deposit Insurance Corporation (Ra 3591)
Philippine Deposit Insurance Corporation (Ra 3591)
Definition (S1): PDIC is a government instrumentality created to 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. (Sec1)
State Policy (S2): To strengthen the mandatory insurance coverage system to generate, preserve,
maintain faith and confidence in the country’s banking system, and protect it from illegal
schemes and machinations.
- While being a government instrumentality with corporate powers, it shall enjoy fiscal
and administrative autonomy
Note: During their tenure or term of office and for a period of 1 year thereafter, the appointive
members of the Board shall be disqualified from holding any office, position or employment in
any insured bank.
Any member of the BOD shall disclose his/her interest to the board and shall recuse from
meeting when the matter is taken up.
DEPOSITS COVERED:
1. Savings Accounts
2. Time Deposits
3. Deposits in acceptable foreign currencies
XPN:
a) TRUST FUNDS as it was expressly excluded from the term “deposit” under RA 7400
b) MONEY MARKET PLACEMENT as it is not included in the term “deposit”
Actions taken by the Corporation shall be final and executory, and may only be
restrained or set aside by the Court of Appeals, upon appropriate petition for certiorari
on the ground that the action was taken in excess of jurisdiction or with such grave
abuse of discretion as to amount to lack or excess of jurisdiction.
Petition for certiorari may only be filed within 30 days from notice of denial of claim for
deposit insurance
INSURED DEPOSIT- the amount due to any bona fide depositor for legitimate deposits in
an insured bank as of date of closure but not to exceed P500, 000.
- The net amount due to any depositor for deposits in an insured bank, after deducting
offsets, less any part thereof which is in excess of P500, 000.
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.
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.
If there is a condition that threatens the monetary and financial stability of the
banking system that may have systematic consequences, the maximum deposit
insurance may be adjusted in such amount, for such period, and/or for such
deposit products by the unanimous vote of the BOD.
RESOLUTION- 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.
RISK-BASED ASSESSMENT SYSTEM- 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
non-contingent;
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.
(S8) (a) Whenever upon examination by the Corporation into the condition of any insured bank,
it shall be disclosed that an insured bank or its directors or agents have committed, are
committing or about to commit unsafe or unsound practices in conducting the business of the
bank, or have violated, are violating or about to violate any provisions of any law or
regulation to which the insured bank is subject, the Board of Directors shall
1. submit the report of the examination to the Monetary Board to secure corrective action
thereon.
2. If no such corrective action is taken by the Monetary Board within forty-five (45) days from
the submission of the report, the Board of Directors shall, motu proprio, institute corrective
action which it deems necessary.
The Board of Directors may issue a cease and desist order, and require the
bank or its directors or agents concerned to correct the practices or
violations within 45 days.
If the practice or violation is likely to cause insolvency or substantial
dissipation of assets or earnings of the bank, or is likely to seriously weaken
the condition of the bank or otherwise seriously prejudice the interests of its
depositors and the Corporation, the period to take corrective action shall not
be more than 15 days.
The Corporation may terminate the insured status of any bank that fails or
refuses to comply, within thirty (30) days from notice, with any cease-and-desist
order issued by the Corporation, or with any corrective action imposed by the
Monetary Board, under this section pertaining to a deposit-related unsafe and/or
unsound banking practice.
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 MDIC for 180 days.
POWERS AND RESPONSIBILITIES AND PROHIBITIONS
TYPES OF EXAMINATION
1. Regular Examination- An examination conducted independently or jointly with the BSP.
It requires the prior approval of the PDIC BOD and the MB.
It 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.
BANK RESOLUTION(S11)
The Corporation, in coordination with the BSP, may commence the resolution of a bank
under this section upon:
Within a period of 180 days from a bank’s entry into the resolution, the Corporation, through
the affirmative vote of atleast 5 members of the PDIC BOD, shall determine whether the
bank may be resolved through the purchase of all its assets and assumption of all its
liabilities, by a qualified investor.
1. FMV of the assets of the bank, its franchise, as well as the amount of liabilities;
2. Availability of a qualified investor;
3. Least cost to the DIF; and
4. Interest of the depositing public.
When a bank is ordered closed by the MB, the Corporation shall be designated as receiver
and it shall proceed with the takeover and the liquidation of the closed bank.
(S13) The receiver is authorized to adopt and implement, without need of consent of the
stockholders, BOD, creditors or depositors of the closed bank, any or a combination of the
following modes of liquidation:
1. Conventional Liquidation(S16):
3. On the assets
Deemed in custodia legis in the hands of the receiver, and may not be
subject to attachment, garnishment, execution, levy or any other court
processes.
4. On labor relations
Employer-Employee relationship shall be deemed terminated upon service
of the notice of closure of the bank.
5. Contractual Obligations
The receiver may cancel, terminate, rescind or repudiate any contract of
the closed bank that is not necessary for the orderly liquidation of the
bank, or is grossly disadvantageous to the closed bank, or for any ground
provided by law.
6. On interest payments
Liability to pay interest and all other obligations shall cease upon its
closure by the MB
7. Liability for penalties and surcharges for late payment and nonpayment of taxes
From the time of closure, the closed bank shall not be liable for the
payment of penalties and surcharges arising from the late payment or
nonpayment of real property tax, capital gains tax, transfer tax and similar
charges.
12. All assets, records, and documents in the possession of the closed bank at the time of
its closure are presumed held by the bank in the concept of an owner.
13. The exercise of authority, functions, and duties by the receiver under this Act shall be
presumed to have been performed in the regular course of business.
14. Assets and documents of the closed bank shall retain their private nature even if
administered by the receiver.
- Shall be filed ex parte within a reasonable period from receipt of the MB resolution
placing the bank under liquidation
The liquidation court shall have exclusive jurisdiction to adjudicate disputed
claims against other closed banks, assist in the enforcement of individual
liabilities of the stockholders, directors and officers and decide on all other
issues as may be material to implement the distribution plan adopted by the
Corporation for general application to all closed banks.
FILING OF CLAIMS
All persons or entities with claims against the assets of the closed bank shall
file their claims with the receiver within 60 days from the date of publication
of the notice of closure.
Claims denied by the receiver shall be filed with the liquidation court within
60 days from receipt of the final notice of denial of claim.
PERMANENT INSURANCE FUND (S17)
PIF: 3 Billion Pesos
Deposit Insurance Fund which is the capital account shall consist of the following:
a. Permanent Insurance Fund
b. Assessment collections
c. Reserves for insurance and financial assistance losses which shall be maintained at a
reasonable level to ensure capital adequacy; and
d. Retained earnings
PROOF OF CLAIMS
The Corporation may require proof of claims to be filed before paying the insured
deposits
In any case, where it 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.
Recognition of Owner
The PDIC or any insured bank is not 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 a closed bank
XPN: 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 TRO is issued, grave
injustice and irreparable injury will arise.
COVERAGE:
1. All deposits of whatever nature with banks or banking institutions found in the
Philippines;
2. Investments in bonds issued by the Philippine Government, its political
subdivisions and instrumentalities.
PROHIBITED ACTS:
1. Examination/ inquiry/ looking into all deposits of whatever nature with banks or banking
institutions in the Philippines including investment bonds issued by the government, by
any person, government official or office(S2).
RA 1405
Upon written consent of the depositor.
In cases of impeachment.
Upon order of a competent court in cases of bribery and dereliction of duty of public
officials
In cases of money deposited or invested is the subject matter of the litigation.
OTHER LAWS:
Anti-Graft and Corrupt Practices Act
In cases of unexplained wealth
NIRC
1. Upon order of the CIR in respect of the bank deposits of a decedent for the purpose of
determining such decedent’s gross estate.
2. Upon order of the CIR in respect of bank deposits of a taxpayer who has filed an
application for compromise of his tax liability by reason of financial incapacity to pay his
tax liability.
AMLA
If the AMLC determines that a particular deposit or investment with any banking
institution is related to the following: HK-MAD
a. Hijacking
b. Kidnapping
c. Murder
d. Destructive Arson
e. Violation of the Dangerous Drugs Act
Unclaimed Balances Act
In case of dormant accounts/ deposits for atleast 10 years
Foreign Currency Deposit Act
Upon written consent of the depositor
Note: A co-payee in a check deposited in a bank is likewise a co-depositor. No written
consent of the other co-payee is necessary in an inquiry of the deposits by the said co-
depositor.
NCBA
1. DOSRI loans;
2. When the examination is made by the BSP to insure compliance with the AML Law in
the course of a periodic or special examination
In-camera inspection by the Ombudsman
Requisites:
a. Pending case before a court of competent jurisdiction;
b. Account must be clearly identified;
c. The inspection is limited to the subject of the pending litigation;
d. The bank personnel and account holder must be notified to be present during the
inspection; and
e. The inspection must cover only the account identified in the pending case
Human Security Act
The justices of the Court of Appeals designated as special court to handle the anti-
terrorism cases may authorize the examination of bank deposits of:
1. A person charged or suspected of the crime of terrorism or conspiracy to commit
terrorism;
2. A judicially declared and outlawed terrorist organization, association, or group of
persons; and
3. A member of such judicially declared and outlawed organization, association or
group of persons.
JURISPRUDENCE:
1. Examination of deposits of persons charged
PENALTIES:
The penalty of imprisonment of not more than 5 years or a fine of not more than 20,000
pesos or both, in the discretion of the court.
GARNISHMENT:
Bank accounts may be garnished by the creditors of the depositor. There is NO violation
of the Law on Secrecy of Bank Deposits if the accounts are garnished. It was not the intention of
the legislature to place bank deposits beyond the reach of execution to satisfy a final judgment.
Its purpose is merely to secure information as to the name of the depositor and whether or not the
defendant had a deposit in said bank, only or purposes of garnishment. Any disclosure is purely
incidental to the execution process.
The amount of deposit is actually not disclosed and the intent of the legislature does not
cover garnishment.
XPN: In a case which involved an American tourist who was found guilty or repeatedly
raping a 12 year-old child, the Supreme Court allowed the garnishment of foreign deposits
belonging to the American because the law was not intended to cause injustice.
Note: Despite such pronouncement that trust funds are considered deposits, trust funds remain
not covered by PDIC.
Q: Are foreign currency deposits covered by the Secrecy in Bank Deposits (R. A. 1405)?
A: No. Foreign currency deposits are covered by R.A. 6426 otherwise known as the Foreign
Currency Act. Under the same law, all authorized foreign currency deposits are considered of an
absolutely confidential nature and, except upon the written permission of the depositors, in no
instance shall be examined, inquired or looked into by any person, government official, bureau
or office whether judicial or administrative private.
15% shall be in the form of foreign currency deposit with the Central Bank
The balance in the form of foreign currency loans or securities, which loans or
securities shall be of short term maturities and readily marketable.
o Such foreign currency loans may include loans to domestic enterprises which are
export-oriented or registered with the Board of Investments, subject to the
limitations to be prescribed by the Monetary Board on such loans.
Except as the Monetary Board may otherwise prescribe or allow, the foreign currency
cover shall be in the same currency as that of the corresponding foreign currency deposit
liability. The Central Bank may pay interest on the foreign currency deposit, and if
requested shall exchange the foreign currency notes and coins into foreign currency
instruments drawn on its depository banks.
Exemption from the requirements:
Depository banks which, on account of networth, resources, past performance, or other
pertinent criteria, have been qualified by the Monetary Board to function under an
expanded foreign currency deposit system
Subject to prior CB approval when required by Central Bank regulations, said depository
banks may extend foreign currency loans to any domestic enterprise, without the
limitations in maturity and marketability, and such loans shall be eligible for purposes of
the 100% foreign currency coverage.
Exceptions:
1. Upon Written permission of the depositor;
2. Upon order of a competent court in cases of violation of the Anti-money
Laundering Act of 2001;
3. During BSP’s periodic or special examination;
4. Disclosure of the Treasurer of the Philippines, when the Unclaimed Balances Law
apply;
5. BSP/PDIC inquiry if there is a finding of unsafe and unsound banking practice;
6. In Salvacion v CB, where a Filipino child was raped by a foreigner, the SC
allowed, pro hac vice, garnishment of foreign currency deposit because if it would
rule otherwise, there would be injustice.
Withdrawability and transferability of deposits(S5)
There shall be no restriction on the withdrawal by the depositor of his deposit or on the
transferability of the same abroad except those arising from the contract between the depositor
and the bank.
OTHER FEATURES:
a. Authorized banks may adopt a numbered account system for recording and servicing
deposits in non-checking accounts(S3)
b. In the event of a new enactment or regulation is issued decreasing the rights granted
under the law, it shall not apply to FCDs already made or existing at the time of issuance
of such new regulation or enactment(S12)
PENALTY: Imprisonment of not less than 1 year nor more than 5 years or a fine of not less
than P5,000 nor more than P25,000, or both such fine and imprisonment at the discretion of the
court..
DEFINITION OF TERMS:
1. Investment: Equity participation in any enterprise organized or exiting under the laws of
the Philippines.
2. Foreign Investment: An equity investment made by a non-Philippine national in the
form of foreign exchange and/or other assets actually transferred to the Philippines duly
registered with the CB which shall assess and appraise the value of such assets other than
foreign exchange.
3. “Doing business” in the Philippines shall include:
a. soliciting orders, service contracts, opening offices, whether called "liaison"
offices or branches;
b. appointing representatives or distributors domiciled in the Philippines or who in
any calendar year stay in the country for a period or periods totaling one hundred
eighty (180) days or more;
c. participating in the management, supervision or control of any domestic business,
firm, entity or corporation in the Philippines; and
d. any other act or acts that imply a continuity of commercial dealings or
arrangements, and contemplate to that extent the performance of acts or works, or
the exercise of some of the functions normally incident to, and in progressive
prosecution of, commercial gain or of the purpose and object of the business
organization.
Under the Foreign Investment Act, the following are not considered doing business:
Note: To be “doing or transacting business in the Philippines” for purposes of Sec 133 of the
Corporation Code, the foreign corporation must actually transact business in the Philippines,
that is, perform specific business transactions within the Philippine territory on a continuing
basis, in its own name or for its own account.
Under the Foreign Investment Act, the following are considered as Philippine National:
- Registration with the SEC or with the Bureau of Trade Regulation and Consumer
Protection (BTRCP) of the DTI in the case of single proprietorships, unless
participation of non-Philippine nationals in the enterprise is prohibited or limited to a
smaller percentage by existing laws and/or under the provisions of this Act.
- The SEC/ BTRCP shall not impose any limitations on the extent of foreign
ownership in an enterprise additional to those provided in this Act.
- Any enterprise seeking to avail of incentives under the Omnibus Investment Code of
1987 must apply for registration with the Board of Investments (BOI), which shall
process such application for registration in accordance with the criteria for evaluation
prescribed in said Code.
- During the transitory period, SEC shall disallow registration of the applying non-
Philippine national if the existing JVE, particularly the Filipino partners therein, can
reasonably prove they are capable of making investment needed for domestic market
activities to be undertaken by the competing applicant.
- The SEC shall effect registration of any enterprise applying under this Act within 15
days upon submission of completed requirements.
1. Foreign investment in export enterprises whose products and services do not fall within
Lists A and B of the Foreign Investment Negative List is allowed up to 100% ownership.
2. Export enterprises which are non-Philippine nationals shall register with the BOI and
submit the reports that may be required to ensure continuing compliance of the export
enterprise with its export requirement.
3. BOI shall advice SEC/ BTRCP of any export enterprise that fails to meet the export ratio.
4. The SEC/ BTRCP shall order non-complying export enterprise to reduce its sales to the
domestic market to not more than 40% of its total production
- Failure to comply with the order without justifiable reason, shall subject the
enterprise to cancellation of SEC/ BTRCP registration, and/or the penalties provided
in this law.
FOREIGN INVESMENT ACT IN DOMESTIC MARKET ENTERPRISE
The “negative list” shall mean a list of areas of economic activity whose foreign ownership is
limited to a maximum of 40% of the equity capital of the enterprises engaged therein.
Component Lists:
3. List C shall contain the areas of investment in which existing enterprises already serve
adequately the needs of the economy and the consumer and do not require further foreign
investments, as determined by NEDA applying the criteria provided in Section 9 of this
Act, approved by the President and promulgated in a Presidential Proclamation.
Each Foreign Investment Negative List shall be prospective in operation and shall in no
way affect foreign investment existing on the date of its publication.
STRATEGIC INDUSTRIES(S10)
- The term "strategic industries" shall mean industries that are characterized by all of the
following: