House OKs hike in maximum deposit insurance coverage on 2nd reading

The House of Representatives on Tuesday approved on second reading a measure  empowering the state-run Philippine Deposit Insurance Corp. (PDIC) to increase the maximum deposit insurance coverage (MDIC).

Through viva voce voting, lawmakers approved House Bill 8818 grants the PDIC the power to increase the MDIC to amount indexed to inflation or other economic indicators, subject to review and/or adjustment every three years.

Currently, the MDIC has stood at only up to P500,000 per depositor per bank.

Under HB 8818, the state-run deposit insurer will become an attached agency of the Bangko Sentral ng Pilipinas.

It also empowers the PDIC to issue rules and establish separate insurance funds and insurance arrangements or structures, taking into consideration the peculiar characteristics of Islamic banking and other deposit products as defined by the BSP.

The bill also designates PDIC as statutory receiver of BSP-supervised non-bank institutions with deposits or products covered by deposit insurance.

The measure restricts the power to conduct bank examination to cases where there is a finding of fraud or unsafe or unsound banking related to deposit taking or a failure of corrective action, such action by PDIC is deemed appropriate and necessary by BSP.

It also clarifies the applicability of Republic Act 7656 or the Dividend Law by defining what constitutes income from other sources. 

It also removes from the PDIC the power to issue cease-and-desist orders pertaining to deposit-related unsafe and unsound banking, which power shall be vested with BSP. 

House Committee on Banks and Financial Intermediaries Chairman Junie Cua, principal author of the proposal, said the HB 8818 will also strengthen the regulatory framework of PDIC and to promote and safeguard the interests of the depositing public by providing insurance coverage on all insured deposits and helping maintain a sound and stable banking system.

Through a series of acts of Congress, Makati City Rep. Luis Campos, for his part as one of the authors of the bill, said the MDIC, which stood at P40,000 in 1984, has been increased three times to P100,000 in 1992;   P250,000 in 2004; and P500,000 in 2009.

Banks pay for the compulsory insurance premiums to guarantee the MDIC, he said.

“We are confident that once empowered, the PDIC will promptly enlarge and restore the MDIC’s full value of protection, considering the erosion of the peso’s purchasing power over the years,” Campos said.

Meanwhile, the bill is expected to be approved on third and final reading next week.