January 26, 2017

A total of 22 banks were prohibited from doing business by the Monetary Board of the Bangko Sentral ng Pilipinas (BSP) in 2016. The Philippine Deposit Insurance Corporation (PDIC) reported that the banks closed comprised 21 rural banks and one thrift bank. Estimated insured deposits of the closed banks aggregated almost PHP2 billion involving 72,484 deposit accounts. The state deposit insurer further disclosed that it has paid PHP1.8 billion in total estimated insured deposits covering 58,944 accounts. These represent 92% of estimated total insured deposits and 81% in terms of number of accounts as of end 2016, respectively.

In 2015, 14 banks were ordered closed with aggregate estimated insured deposits of PHP1.2 billion representing 70,541 deposit accounts. Compared to 2016, the consolidated insured deposits and the estimated insured accounts of closed banks in 2015 were lower by 14% and 3%, respectively.

PDIC President Cristina Que Orbeta stated that beneficiaries of deposit insurance benefitted from quick payment of their claims. The turn-around time for payment of deposit insurance from takeover of the closed bank ranged from 3 to 15 working days in 2016, depending on the size of the bank and the state of records of the closed bank. In 2015, the turn-around time ranged from 12 to 22 working days.

Half of the 22 closed banks in 2016 were taken over after the effectivity of Republic Act (RA) 10846 on June 11, 2016 which amended the PDIC Charter. Under RA 10846, banks ordered closed by the Monetary Board transition directly from bank closure to liquidation. Banks closed after June 11, 2016 are no longer subject to the 90-day receivership period and thus, no longer subject to rehabilitation. This will benefit creditors including depositors with uninsured balances, as PDIC is now authorized to immediately convert closed bank assets into cash, thereby reducing asset management costs and increasing bank assets.

To further expedite the liquidation process, PDIC is now also authorized to immediately assign encumbered assets of the closed bank as payment to secured creditors without need for approval of the liquidation court. This will not only help expedite the settlement of claims of secured creditors, but also further reduce asset administration expenses. “Faster liquidation will improve creditors’ chances of recovering their claims from closed banks,” President Orbeta said.

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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.