This content is from: Local Insights

Mandatory deposit insurance coverage

The Charter of the Philippine Deposit Insurance Corporation (PDIC) was recently amended to increase the insurance coverage from P250,000 ($5,200) to P500,000 for each bona fide depositor. This is partly in response to the need to strengthen the country's banking system in the midst of the global economic slowdown.

Excluded from insurance coverage are: (1) investment products such as bonds and securities, trust accounts, and other similar instruments; (2) deposit accounts or transactions that are unfunded, or that are fictitious or fraudulent; (3) deposit accounts or transactions constituting or emanating from unsafe and unsound banking practices, as determined by the PDIC, in consultation with the Bangko Sentral ng Pilipinas (BSP), after due notice and hearing, and publication of a cease-and-desist order issued by the PDIC in respect of such accounts or transactions; and (4) deposits that are determined to be the proceeds of an unlawful activity proscribed by the Anti-Money Laundering Act.

Under the amended Charter, the PDIC (together with the BSP) is granted the power to inquire into and examine deposit accounts and all information related thereto, in case there is a finding of unsafe and unsound banking practice.

Equally significantly, the PDIC, its directors, officers, employees and agents are held free and harmless, to the full extent permitted by the law, from civil liabilities that may arise in connection with the performance of their functions, absent bad faith, malice or gross negligence in the performance of their duties.

Rafael A Morales

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