September 5, 2016

Depositors with uninsured deposit balances now have a better chance of recovering their trapped funds in closed banks under Republic Act 10846, the law that amended the Charter of the Philippine Deposit Insurance Corporation (PDIC).

RA 10846 elevated the status of claims for uninsured deposits or those in excess of the maximum deposit insurance coverage of PHP500,000 to ordinary preferred credit. This means that depositors with claims for uninsured deposits shall have the same legal preference as PDIC with regard to the latter's claim for subrogated deposits against the assets of closed banks. This puts at par all deposits in terms of claims against the assets of the closed bank.

The elevation to ordinary preferred credit of claims of uninsured deposits is among the enhanced depositor protection measures instituted under RA 10846. This measure is intended to safeguard the interest of the depositing public and to help return to the economy funds that were trapped due to bank failures.

Prior to the amendment, claims for uninsured deposits were considered as ordinary credit and treated as the least priority in terms of payment of claims against closed banks' remaining assets. As ordinary preferred creditors, the prospects of recovery by depositors of the uninsured portion of their deposits are slightly higher compared to zero recovery as ordinary creditor. PDIC, however, emphasized that the actual amount of recovery of uninsured deposits is contingent on the availability of the assets of the closed banks.

RA 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.