The House of Representatives, in its plenary session on August 25, passed on second reading a bill strengthening the deposit insurance system in the country.

Rep. Nelson P. Collantes, Chairman of the House Committee on Banks and Financial Intermediaries, authored House Bill No. 6020 to amend Republic Act No. 3591, as amended, otherwise known as the Charter of the Philippine Deposit Insurance Corporation (PDIC). HB 6020 aims to institutionalize much-needed reforms in the field of deposit insurance, and resolution and receivership of banks. The proposed legislation is intended to ensure the protection of depositors and promote financial inclusion. He expressed optimism that HB 6020 will soon be passed on third and final reading.

PDIC President Cristina Que Orbeta welcomed this development and expressed hope that Senate Bill 2268, a counterpart bill filed by Senate Committee on Banks, Financial Institutions and Currencies Chairman Sen. Sergio R. Osmeña III, will likewise be passed. Senate President Franklin Drilon has strongly supported Senate Bill 2268. In a general membership meeting of the Makati Business Club on August 6, Senate President Drilon assured that the "Senate remains relentless in passing reform measures that will ensure a better business climate" including the PDIC bill to make it a more effective and efficient insurer of deposits consistent with international best practices and for a more effective recovery of creditors against assets of closed banks.

The PDIC President said that the reform measures contained in both HB 6020 and SB 2268 will further strengthen PDIC's capabilities to more effectively provide protection to the depositing public via more expeditious payment of deposit insurance claims. These will allow the immediate reimbursement of depositors of their insured deposits as the bills will authorize PDIC to accept evidence of deposit (i.e., passbook, certificate of time deposit, ATM card) as additional proof of deposits instead of relying exclusively on records of the closed bank.

The bills also allow gross settlement of deposit insurance claim of depositors who are also borrowers of the closed banks. Thus, instead of netting out payables from their insured deposits, depositors will now have the option to settle their obligations directly with the closed banks, and get their deposit insurance entitlement in full.

The bills also aim to facilitate the liquidation process for banks that are inevitably closed by the Monetary Board of the Bangko Sentral ng Pilipinas to preserve the value of whatever is left of the assets of the closed bank in order to enhance the recovery of creditors from the closed banks' assets. These also aim to elevate the status of claims of depositors with uninsured deposits, i.e., those with deposits in excess of the maximum deposit insurance of P500,000 per depositor. Claims for uninsured deposits may be settled ahead of other ordinary creditors, thus improving their chances of recovery from the assets of closed banks.

Overall, HB 6020 and SB 2268 draw lessons from the experiences of deposit insurers around the world and aim to put PDIC at par with international standards in ensuring an effective deposit insurance system.

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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 permanent and continuing 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.