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PDIC V Citibank
PDIC V Citibank
PDIC v Citibank depositors and not the deposits of the same bank through its head office
GR NO. 170290 or foreign branches; (3) no law or jurisprudence on the treatment of
11 April 2012 inter-branch deposits for purposes of insurance; and (4) according to the
By: Migs PDIC Charter, obligations payable at the office of the bank located outside
Topic: Systematic Risk: Certain Prudential Measures the Philippines is excluded from the definition of a deposit or an insured
Petitioners: Philippine Deposit Insurance Corporation deposit.
Respondents: Citibank and Bank of America
Ponente: Mendoza, J. ISSUE:
W/N the money placed in the Philippine branch by the head office and
FACTS: foreign branches of Citibank and BA are insurable deposits under the
PDIC is created under RA 3591 as amended by RA 9302. PDIC Charter and are subject to assessment? NO
Citibank is a banking corporation while Bank of America (BA) is a national
banking association, both of which are organized under the US and are HELD/RATIO: A branch has no separate legal personality. This Court is of the
licensed to do business in the Philippines. opinion that the key to the resolution of this controversy is the relationship of the
PDIC conducted an examination of the books of account of Citibank and Philippine branches of Citibank and BA to their respective head offices and their
BA. The examination revealed that Citibank received from its head office other foreign branches.
a total of P11,923,163,908 in dollars, while BA received from its head
office a total of P629,311,869 in dollars. According to PDIC, the amounts The Court explain how a foreign corporation can establish its presence in the
received by the two banks were not reported as deposit liabilities; hence, Philippines:
they were subject to assessment for insurance. 1. Incorporate its own subsidiary as a domestic corporation wherein it
Citibank was then assessed for deficiency worth P1,595,081, while BA would have its separate and independent legal personality;
was assessed for deficiency premium worth P109,264. 2. Create a branch which would not be a legally independent unit and
This prompted both banks to file a petition for declaratory relief before simply obtain a license to do business.
the CFI on the ground that the money they received from the head office
were not deposits and it did not give rise to insurable deposit liabilities as In this case, Citibank and BA both did not incorporate a separate domestic
claimed by PDIC. corporation. They are mere branches without separate legal personality from their
RTC: Ruled in favor of Citibank and BA. The subject money placements parent company. Thus, being one and the same entity, the funds placed by the
were not deposits and did not give rise to insurable deposit liabilities, and respondents in their respective branches in the Philippines should not be treated as
that the deficiency assessments issued by PDIC were improper and deposits made by third parties subject to deposit insurance under the PDIC Charter.
erroneous. Citibank and BA were not liable. The money placements were
not assessable for insurance purposes because they were deposits made PDIC must be reminded of the purpose for its creation under the law. The purpose
outside of the Philippines are therefore excluded from the computation of the PDIC is to protect the depositing public in the event of a bank closure. It has
of liabilities under the PDIC Charter. Furthermore, there was no already been sufficiently established by US jurisprudence and Philippine statutes
depositor-depository relationship between respondents and their head that the head office shall answer for the liabilities of its branch.
office. Such deposits were considered as inter-branch deposits which
were excluded from assessment in accordance with the practice of the US Finally, the Court agrees with the CA ruling that there is nothing in the definition of
Federal Deposit after which PDIC was patterned. a "bank" and a "banking institution" in Section 3 (b) of the PDIC Charter which
CA: Affirmed the RTC. (1) The money were received as part of the bank’s explicitly states that the head office of a foreign bank and its other branches are
internal dealings. The head office and the Philippine branch were the separate and distinct from their Philippine branches.
same entity and thus no bank deposit could have arisen because there
did not exist two separate contracting parties to act as depositor and Based on the foregoing, it is clear that the head office of a bank and its branches
depositary; (2) the purpose of PDIC is to protect the deposits of are considered as one under the eyes of the law. While branches are treated as
separate business units for commercial and financial reporting purposes, in the
end, the head office remains responsible and answerable for the liabilities of its
branches which are under its supervision and control. As such, it is unreasonable
for PDIC to require the respondents, Citibank and BA, to insure the money
placements made by their home office and other branches.
Furthermore, the funds in question are not a deposit under the definition of PDIC
charter. PDIC avers that the funds are dollar deposits and not money placements.
Citing R.A. No. 6848, it defines money placement as a deposit which is received
with authority to invest.