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Last June, the Philippine Deposit Insurance Corp. (PDIC) Charter has been amended via Republic Act 9576 which effectively increases the maximum deposit insurance coverage to P500,000 per depositor. Aside from the increased insurance coverage, the said amendment also strengthened PDIC against deceitful activities that “compromise the stability of our banking system and take advantage of the deposit insurance system provided by the government.”

“We championed this amendment to the PDIC Charter because it safeguards against the maneuverings of individuals and entities that victimize depositors who put their trust in the banking system,” PDIC President Jose Nograles said.

Under the new charter, deposit accounts or transactions that are either constituting or coming from unsafe and unsound banking practices will not be covered by deposit insurance. This rule also apply for deposits that are unfunded, fictitious or fraudulent, and deposits that are determined to be the proceeds of an unlawful activity as defined by the Anti-Money Laundering Act of 2001.

Nograles said, citing Circular 640 of the Bangko Sentral ng Pilipinas (BSP), unsafe and unsound banking practices include “excessive reliance on large, high-cost, or volatile deposits or borrowings,” “engaging in speculative and hazardous investment policies,” “paying excessive cash dividends in relation to the capital position, earning capacity, and asset quality of the bank,” among others.

With the new charter, PDIC can now issue a cease and desist order against such deposit accounts or transactions, which will serve as notice to other banks to prevent practices that endanger depositors and the bank themselves. “Now we have a new charter that supports our position that deposit insurance should not be exploited to support unsafe, unsound and fraudulent practices of unscrupulous bank owners, officers and employees,” he said.

“Given a strengthened Charter, PDIC is adequately equipped to combat fraudulent, unsafe, and unsound enterprises that compromise the stability of our banking system and take advantage of the deposit insurance system provided by the government,” Nograles added.