Regulatory Framework and

Legal Issues in Business

Philippine
Deposit
Insurance
Corporation
(RA 3591, As Amended)

Submitted to:

Atty. Paul Braga

Submitted by:

Alcazar, Mark Daniel

Antonio, Dhenzel
Aquino, Angela Merice
Austria, Caila Jane
Decelis, Julia Katrina
Hernandez, Lea Nizelle
Pregoner, Erica Mae
Turla, Joemar
Yapan, Queen Angela

BSA 3-1
 PDIC ACT (RA 3591, As Amended) By Deposit Type:

PDIC is a ‘Corporation’ which shall insure as • Savings

herein provided, the deposits of all banks which are • Special Savings
entitled to the benefits of insurance under this Act, • Demand/ Checking
and which shall have the powers hereinafter granted. • Negotiable Order of Withdrawal (NOW)
• Certificate of Time Deposits
In view of the crucial role and the nature of its By Deposit Account:
functions and responsibilities, the Corporation, while
being a government instrumentality with corporate • Single Account
powers, shall enjoy fiscal and administrative • Joint Account
autonomy. • Account “By”, “In Trust For” (ITF) or
• “For the Account of” (FAO) another
person
Primary Functions: to act as By Currency:
1. Deposit Insurer – the PDIC shall promote and
safeguard the interests of the depositing • Philippine peso
public by way of providing permanent and • Foreign currencies considered as part of
continuing insurance coverage on all insured BSP’s international reserves
deposits.
2. Co-regulator of Banks – as a bank regulator,
the PDIC is empowered to examine and What are NOT covered by PDIC deposit insurance?
investigate banks.
3. Receiver and Liquidator of Closed Banks – the The following, whether denominated,
PDIC as receiver shall control, manage and documented, recorded or booked as deposit by the
administer the affairs of the bank. bank, are excluded from PDIC deposit insurance
(Section 4 (f) of the PDIC Charter):
• Investment products such as bonds and
Composition: securities, trust accounts and other similar
instruments
Ex-officio Members (2) • Deposit accounts or transactions that:
• 1 Secretary of Finance
• 1 BSP Governor ➢ Are unfunded, fictitious or fraudulent

Appointed by the President (5) ➢ Constitute and/or emanate from unsafe and
• 1 President of PDIC unsound banking practice/s as determined
• 4 from Private Sector by the PDIC, in consultation with the BSP,
after due notice and hearing and publication
of PDIC’s cease & desist order against such
INSURED DEPOSITS
deposit accounts/transactions
Amount due to any bona fide depositor for
legitimate deposits in an insured bank net of any Unsafe and unsound deposit-related
obligation of the depositor to the insured bank as of activities include, among others: (PDIC
the date of closure, but not to exceed P500,000. Regulatory Issuance No. 2011-01)
- Deposit-related
practice/activity/transaction without the
What are covered by PDIC deposit insurance? approval or adequate controls required
under existing laws, rules and
PDIC insures valid deposits in domestic offices regulations
of its member banks.

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 - Failure to keep bank records within bank Pilipinas (BSP) to perform banking functions in the
premises Philippines:
- Granting high interest rates, when bank
has: • Banks incorporated under Philippine laws,
(i) negative unimpaired capital, such as commercial banks, savings banks,
(ii) liquid assets to deposit ratio less mortgage banks, development banks, rural
than 10% banks and cooperative banks and stock
- Non-compliance with PDIC regulations savings and loan associations.
• Domestic branches of foreign banks
➢ Are determined to be proceeds of an
unlawful activity as defined in the Anti- MAXIMUM LIABILITY
Money Laundering Act (Republic Act 9160, as
amended) I. PDIC shall pay deposit insurance (liability) on all
valid deposits up to the Maximum Deposit
• Deposit products that resulted from splitting Insurance Coverage of Php500,000, per
of deposit depositor, of a closed bank.

Splitting of deposit occurs whenever: ▪ Per depositor, per capacity rule- all
➢ A deposit account with an outstanding deposits in the bank maintained in the
balance more than P500,000 is broken same right and capacity for his benefit
down and transferred to two or more either on his own name or in the name
accounts in the name of persons or of others shall be added together to
entities who have no beneficial ownership determine the insured amount, and
in the transferred deposits in their names regardless of the type of account.
➢ Within 120 days immediately preceding or
during a bank-declared bank holiday or ▪ Per bank basis- a depositor is entitled
immediately preceding a closure order to deposit insurance on a per bank
issued by the Monetary Board basis.
➢ For the purpose of availing the maximum Example: Sally has a deposit account
deposit insurance coverage with bank X and bank Y and both
banks closed. Sally with be entitled to
This is considered a criminal act a maximum of 500,000 insurance
punishable by imprisonment of not less than 6 coverage for each of her deposits with
years but not more than 12 years or a fine not the two banks.
less than P500,000 but not more than
P1,000,000, or both, at the discretion of the Determining the depositor:
court.
Account “By” “In Trust For”
“For the
• Deposit products or money placements by the Account Of”
head office of a foreign bank in its branch in Sally by Marry Sally in trust Sally for the
the Philippines because there is only one for Marry account of
entity. Marry
Sally is the Marry is the Marry is the
• Deposits payable in a place outside the depositor. depositor depositor
Philippines (like those in foreign branches)
II. Types of deposit accounts
▪ Single or individual accounts- all individual
PDIC Member Banks depositors are entitled to P500,000 deposit
PDIC member banks include the following insurance in maximum.
institutions authorized by the Bangko Sentral ng

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 ▪ Joint accounts- there is a separate deposit Analysis. The total deposit of Sally in her individual
insurance for every individually owned accounts totaled P1,000,000, but she is only entitled
deposit account and a joint account whether to P500,000 deposit insurance coverage.
the conjunction “or”, “and/or” is used. This
means that a person can be entitled to
P1,000,000 insurance coverage. Illustrative example 2 (Joint accounts)
Provided that: ACCOUNT NAME Deposit Insured
1) If the account is held jointly by two or (In PHP) Deposit
more natural persons, or by two or more of Sally
juridical persons or entities, the Sally or Harry 500,000 250,000
maximum insured deposit shall be Sally and Harry 1,000,000 250,000
divided into as many equal shares as Sally and/or Harry 1,000,000 0*
there are individuals, juridical persons or Total 2,500,000 500,000
entities, unless a different sharing is *Note: Sally does not have any insured deposit share since she
already has P500,000 in total shares in the joint account she has
stipulated in the document of deposit, with Harry.
and
Analysis. The total deposit of Sally in her joint accounts
2) If the account is held by a juridical person totaled P 2,500,000, but she is only entitled to
or entity jointly with one or more natural P500,000 deposit insurance coverage. Furthermore, if
persons, the maximum insured deposit she holds her individual and joint accounts in the same
shall be presumed to belong entirely to bank and this bank closed, she is now entitled to P
such juridical person or entity 1,000,000 insurance coverage; P 500,000 for her
individual deposit account and P 500,000 for her joint
accounts.
Certificate of Deposit:
No owner/holder of any negotiable certificate IV. Additional notes
of deposit shall be recognized as a depositor entitled
to the rights in PDIC Act unless his name is registered Deposits are considered valid upon the
as owner/holder thereof in the books of the issuing determination by the PDIC, based on bank records
bank. that the deposits were.
The aggregate of the interest of the co-owner
over several joint accounts, whether owned by the
III. Illustrative examples same or different individuals, juridical persons or
Illustrative example 1 (Individual account) entities, shall likewise be subject to the maximum
insured deposit of P500,000.
Insured
Deposit For purposes of computing the insured
Name Deposit
(In PHP) deposits, all obligations or loans of the depositor with
of Sally
Sally 100,000 100,000 the closed bank, as of bank closure, shall be deducted
from the depositor's total deposits with the said bank.
Harry For the 100,000 100,000
(PDIC Regulatory Issuance No. 2011-04)
Account of Sally
Harry In Trust For 100,000 100,000
Sally
Sally’s Store (Sole 700,000 200,000 V. Adjustment of Maximum Deposit Insurance
Proprietorship) The amount of coverage may be adjusted in
Total 1,000,000 500,000 such amount, for such a period, and/or for such
deposit products, provided:

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 1. The Monetary Board has determined that ➢ To enforce claim – 2 years AFTER the 2-year
there is a condition that threatens the filing period
monetary and financial stability of the banking
system that may have systematic A.1.1 Expiration of Filing and Enforcement
consequences as defined under RA No. 3591; Period
2. Approval by a unanimous vote of the Board of
Directors of the PDIC in a meeting called for • All rights of depositor against PDIC
the purpose and chaired by the DOF Secretary; with respect to insured deposit are
3. Approval of the President of the Philippines. barred
• All rights of depositor against closed
bank, its shareholders, or the
receivership estate shall be reverted
Under Section 22 of the PDIC Charter, a systemic
to the depositor
risk refers to the possibility of failure of one bank to
settle net transactions with other banks will trigger a • PDIC shall be discharged from any
chain reaction, depriving other banks of funds leading liability on the insured deposit
to a general shutdown of normal clearing and
settlement activity. It also means the likelihood of a
sudden, unexpected collapse of confidence in a B. WHO?
significant portion of the banking or financial system
with potentially large real economic effects. B.1 Filing of Claim

➢ Required to file claim:

Coverage: o Depositors with valid deposit accounts
with balances of > ₱100,000
The deposit liabilities of any bank or banking
o Depositors who have outstanding
institution, which is engaged in the business of
obligations with the closed bank
receiving deposits as herein defined on the effective
REGARDLESS of amount of deposits
date of the PDIC Act, or which thereafter may engage
o Depositors with account balances of <
in the business of receiving deposits, shall be insured
₱100,000 and with:
with the PDIC.
■ No updated address in the bank
records; OR
■ Have not updated address
REQUIREMENTS FOR CLAIMING INSURANCE through Mailing Address Update
Form (MAUF) issued by the PDIC
A. WHEN? o Depositors who maintain their
accounts under the name of business
A.1 When to file and enforce claim entities regardless of type of account
and account balance
➢ To file claim – within 2-year prescriptive o Depositors with accounts not eligible
period from actual takeover for early payment regardless of type of
○ During the claims settlement account and account balance per
operations period, as announced in the advice of PDIC
Notice to Depositors
■ Must be published in national or ➢ NOT Required to file claim:
local newspapers; or o Depositors with valid deposit account
■ Posted in: balance of ≤ ₱100,000, provided:
● the bank premises and ■ Have no obligations with the
conspicuous places within closed bank; and
the locality; and
● in the PDIC website
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 ■ Have complete and updated C. WHAT?
addresses in the bank records OR
have updated these through the C.1 Requirements before payment
MAUF* issued by PDIC
• PDIC may require PROOF OF CLAIMS,
*must be updated BEFORE start of onsite before paying the insured deposit
claims settlement operation through • If PDIC is not satisfied as to the validity of a
submitting MAUF to PDIC representative claim for an insured deposit, it may require
stationed at the closed bank final determination of a court of
competent jurisdiction before paying such
★ They are entitled to immediate or claim
early payment of deposit insurance
claim (to provide convenience to
small depositors)
★ Payments are sent to the D. HOW?
depositor’s mailing address as a:
○ postal money order; or D.1 Steps in filing deposit insurance claims
○ checks sent via registered mail
or courier services 1. Prepare the following documents:
▪ Postal money orders or a. Original evidence of deposits such as
checks amounting to ≤ savings passbook, certificate of time
15,000 may be encashed in deposit, bank statement, unused
any of the local post offices checks, and ATM card.
or branches of the Land b. Original copy of ONE (1) VALID PHOTO-
Bank of the Philippines (LBP) BEARING IDENTIFICATION
DOCUMENTS(ID) with clear signature
B.2 Signing the Claim Form (PATED) of depositor/claimant
c. If the depositor is below 18 years old, a
• Parent – if the depositor is < 18 yrs. old photocopy of his/her birth certificate
• Agent – if ‘BY’ accounts from the Philippine Statistics Authority
• Trustee – if ‘ITF’ (In Trust For) accounts (PSA) or duly certified copy from the
• Each Depositor – if joint accounts such as local civil registrar and valid IDs of the
“Or”, “And/Or” or “And” parent.
• Depositor - if ≥ 18 yrs. Old d. Original copy of a notarized Special
Power of Attorney (SPA) for claimants
★ In the absence of the depositor: who are not the signatories in the bank
○ If unable to file his claim personally: records.
■ a representative may file on his ★ In the case of minor depositor, the
behalf by presenting a duly notarized SPA must be executed by the
Special Power of Attorney (SPA), or parent.
duly authenticated SPA,
○ If residing abroad: 2. Submit to:
■ a representative must present an a. If filing personally:
SPA duly authenticated by the • The PDIC representatives at the
Philippine Consulate nearest his premises of the closed bank
residence. during Claims Settlement
Operations (CSO) or to the PDIC
Public Assistance Center at the
3rd Floor, SSS Bldg.,6782 Ayala
Avenue corner V.A. Rufino Street,
Makati City after the onsite CSO.
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 b. If filing through Mail: Rights of PDIC upon payment of insured deposits:
• Send the accomplished and o PDIC shall be subrogated to all rights of
notarized Claim Form and depositors against the closed bank to the extent
requirements to The Claims of such payment.
Processing Department of PDIC o Insured Portion:
4/F SSS Building, 6782 Ayala ▪ Right to receive the same dividends and
Avenue corner V.A. Rufino St. 1226 payments from the proceeds of the assets of
Makati City such closed bank and recoveries on account
of stockholders’ liability as would have been
D.2 Procedure for the PDIC: payable to the depositor
o Uninsured Portion:
1. PDIC shall commence the determination of ▪ Such depositor shall retain his claim
insured deposits due the depositors of a
closed bank upon its actual takeover of the Withholding of payment:
closed bank. The PDIC may withhold payment of such
2. PDIC shall give notice to the depositors of portion of the insured deposit for the payment of any
the closed bank of the insured deposits due liability of such depositor as a stockholder of the
them by whatever means deemed closed bank, or of any liability of such depositor to the
appropriate by the Board of Directors. closed bank or its receiver, which is not offset against
3. PDIC shall publish the notice once a week a claim due from such bank, pending determination
for at least 3 consecutive weeks in a and payment of such liability by such depositor or any
newspaper of general circulation or, when other liable therefor.
appropriate, in a newspaper circulated in
the community or communities where the Preference:
closed bank or its branches are located. All payments by PDIC of insured deposits in
closed banks partake of the nature of public funds,
and as such, must be considered a preferred credit
similar to taxes due to the National Government in the
PAYMENT OF THE INSURED DEPOSIT order of preference under Article 2244(9) of NCC,
provided further, that this preference shall be likewise
Period for Payment: effective upon liquidation proceedings already
○ As soon as possible, but within 6 months from commenced and pending as of the approval of PDIC
the date of filing Act, where no distribution of assets has been made.
➔ Failure to settle claim of insured depositor
(where such failure was due to grave abuse of
discretion, gross negligence, bad faith or malice)
◆ Will subject the directors, officers or Other Things to Remember:
employees of PDIC responsible for the delay
◆ Imprisonment from 6 months to one year • The PDIC will not accept claims that are
◆ the period shall not apply if the validity of incomplete or lacking in requirements
the claim requires the resolution of issues of
facts and/or law by another office, body or • The PDIC may also require additional documents
agency. in the course of claims processing

Mode of payment: • The PDIC, as Receiver, has the authority to adjust

○ By Cash; or the interest rate on unpaid interests on deposits
○ By making available to each depositor a if such rate is deemed unreasonably higher
transferred deposit in another insured bank in an compared to market rates
amount equal to insured deposit of such
depositor

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• The standard procedures for claims settlement
may not apply if the closed bank fails to properly
turn over to the PDIC the closed bank’s complete
records. Without the complete records, the PDIC
will not be able to conduct the validation process
for bank deposits, a requirement before deposit
insurance claims are paid.

• Under Section 21 of the PDIC Charter, payment of

an insured deposit to any person by PDIC shall
discharge the PDIC, and payment of transferred
deposit to any person by the new bank or by an
insured bank in which a transferred deposit has
been made available shall discharge PDIC and
such new bank or other insured bank, to the same
extent that payment to such person by the closed
bank would have discharged it from liability for
the insured deposit.