Press Release
December 15, 2008

Set to sponsor Banks Panel Report today

Sen. Edgardo J. Angara today said that it would only be matter of time before the deposit insurance coverage of Philippine Deposit Insurance Corporation (PDIC) will be increased from Php 250,000 to Php 500,000 since the Banks Committee have already submitted its report and there was a unanimous agreement in amending PDIC's charter.

"These are extremely confusing times where panic can only make matters worse. Maintaining, if not restoring confidence in the banking system should be our priority. A stable and dependable deposit insurance system shores up depositor confidence. It also guarantees the sufficiency of credit to finance vital economic activities in the country," said Angara who chairs the Senate Committee on Banks, Financial Institutions and Currencies.

He added, "At the proposed level of Maximum Deposit Insurance Coverage (MDIC), 97.23% of the more than 31 million deposit accounts in the country will enjoy the benefits of deposit insurance cover. The increase will encourage depositors to keep their money in the banks, knowing that their savings would be safe, intact, and readily available on the faith and credit of the government."

Committee Report No. 233, submitted by the Banks Committee, maintained Angara's proposal to double the deposit insurance coverage. The first Php 250,000 shall be for the account of the corporation while the remaining half shall be the obligation of, and deemed automatically appropriated and paid by the National Government. Provided by after six years, the entire maximum deposit insurance coverage shall be for the account of the corporation.

Angara cited initiatives implemented by other countries to alleviate the financial turmoil in their respective banking systems.

In Europe, the governments of Sweden, Spain, Belgium and The Netherlands have agreed to raise deposit guarantees from 20,000.00 to 100,000.00. Meanwhile, governments of Ireland, Germany, France, Denmark and Austria have provided blanket guarantee of bank deposits. The United Kingdom has likewise increased the guarantee to its depositors from 35,000.00 to 50,000.00.

In the US, The Federal Deposit Insurance Corporation (FDIC) has increased its deposit insurance coverage from $100,000.00 to US$250,000.00 effective until 2009.

In Asia, our neighboring countries such as Hong Kong, Malaysia and Singapore have announced sovereign guarantee of all local and foreign currency deposits until the end of 2010. Indonesia has recently extended its coverage from the equivalent of US$9,000.00 to US$182,000.00, while Kazakhstan's coverage was adjusted from the equivalent of US$6,000.00 to US$42,000.00.

Also included in the Banks panel report is a provision that in case of a condition that threatens monetary and financial stability that can have systemic consequences the maximum deposit insurance coverage may be adjusted for such amount, period and/or for such deposit products. This can be done upon the approval of the Board of Directors subject to the approval of the Philippine President.

PDIC was also given the authority to form, establish, organize and operate and/or contract to operate subsidiaries or corporations whose primary purpose is to operate as Bridge Bank and/or manage acquired assets of the PDIC.

Bridge banks refer to a temporary bank licensed by the Bangko Sentral ng Pilipinas, established and operated to acquire assets of a failed bank to facilitate its resolution.

"We are facing extraordinary challenges. Internationally, governments have responded by prioritizing measures to restore stability to their respective economies. While nobody can accurately predict what the longer-term consequences of this crisis will be, the emerging truth requires us to prepare now for the inevitable impact to the Philippines." added Angara.

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