Philippine Deposit Insurance Corporation (PDIC) President Jose C. Nograles said that the proposed P14 billion loan from the Bangko Sentral ng Pilipinas (BSP) is a prudent funding strategy that will prevent the Corporation’s Deposit Insurance Fund (DIF) from running into future funding risks.

He clarified that the loan will be used to payout deposit insurance claims in 12 banks placed under PDIC receivership by Monetary Board in December 2008. He assured that PDIC is financially strong and capable to service all valid claims for deposit insurance. “ However, it is a business decision given the choices of immediately spending PDIC’s resources and borrowing long-term fund from the BSP. It will also provide immediate liquidity to the PDIC,” Nograles explained. He said that the proposed loan has identifiable repayment sources and will be periodically serviced from PDIC’s semestral assessments and investment income.

He underscored the need to conserve the DIF since a strong DIF contributes to the strengthening of the public confidence in the stability of the banking system and to PDIC’s ability to service deposit insurance claims.

The DIF is the source of funds to payout deposit insurance claims. As of end 2008, the DIF grew by 11.4% to P60.46 billion from last year’s level of P54.3 billion. The DIF has likewise grown at an average rate of 9.4% over the last five years.