Press Release
February 24, 2009

PDIC must meet all bank deposit claims -- Loren

Senator Loren Legarda cited today the need for the Philippine Insurance Deposit Corporation (PDIC) to continuously increase and replenish its deposit insurance fund to be able to meet all claims made against insured banks that had gone bankrupt.

"The PDIC says it will need P14 billion to pay the valid claims of the 130,000 small depositors of the shuttered rural banks of the Legacy Group. But as reported, it only has a total of P60 billion in its deposit insurance fund," said Loren.

"The financial position of PDIC is not very reassuring considering that it insures the deposits in all of the banks operating in our country. Heaven forbids, but the PDIC must always be ready for worst case scenarios like more banks folding up simultaneously," she added.

The PDIC had tried to borrow from the Bangko Sentral ng Pilipinas (BSP) the P14 billion needed to pay Legacy depositors, but a high-ranking central bank official revealed that the Monetary Board had denied the PDIC's loan application.

According to the official, the BSP wants the PDIC to use part of its insurance fund to meet the claims against Legacy because the fund was intended for that purpose. Likewise, it was revealed that PDIC already owes the BSP P72.5 billion as of December 2008.

PDIC president Jose Nograles had assured the public however that the "outcome of the [PDIC-BSP loan application] discussion will not in any way affect our ability to pay." But Loren said that with the banking sector reeling from the economic slowdown, the issue concerning PDIC is whether it will have a sustainable ability to meet all future claims.

"What now after the PDIC's insurance fund runs out?" she asked. "Thus, it is in our interest to make PDIC strong so our depositors will have peace of mind and so that our banking sector will be stronger," she said. The PDIC cannot forever bank on borrowing from the BSP in case of future problems in meeting claims, the senator stressed.

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