August 30, 2016

The Philippine Deposit Insurance Corporation (PDIC) can now terminate the insured status of banks engaging in deposit-related unsafe and unsound banking practices as part of the enhanced depositor protection measures granted to the state deposit insurer by Republic Act 10846.

Republic Act 10846 that amended the PDIC Charter restored PDIC's power to terminate the insured status of banks that fail or refuse to comply, within 30 days from notice, with the PDIC's cease-and-desist orders (CDOs) or corrective actions imposed by the Monetary Board of the Bangko Sentral ng Pilipinas (BSP) for deposit-related unsafe and unsound banking practices.

PDIC President Cristina Que Orbeta said the restoration of PDIC's authority to terminate the insured status of banks is aimed at promoting market discipline and deterring bank officers and employees from engaging in unsafe and unsound banking practices. Termination of the insured status of a bank serves as a warning to the depositing public that the bank is engaging in deposit-related unsafe and unsound banking practices. It also prevents the bank from further enticing depositors to entrust their hard-earned money or add to their existing deposits in the subject bank.

Termination of insured status shall take effect upon publication of the notice of termination in a newspaper of general circulation. The notice will also inform depositors of the bank that their deposits, less all subsequent withdrawals, remain insured up to the maximum deposit insurance coverage of PHP500,000 for a period of 180 days upon effectivity of termination. This is to provide ample time for depositors to withdraw their deposits from the bank should they choose to do so. After the date of effectivity of the termination of the insured status of a bank, PDIC shall no longer insure any additions to, or renewal of existing deposits and new deposits.

R.A. No. 10846 was signed into law on May 23, 2016 and took effect on June 11, 2016.

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The Philippine Deposit Insurance Corporation (PDIC) was established on June 22, 1963 by Republic Act 3591 to provide depositor protection and help maintain stability in the financial system by providing deposit insurance. Effective June 1, 2009, the maximum deposit insurance coverage is P500,000 per depositor. All deposit accounts by a depositor in a closed bank maintained in the same right and capacity shall be added together. A joint account shall be insured separately from any individually-owned deposit account.

PDIC news/press releases and other information are available at the website, www.pdic.gov.ph.