PHILIPPINE DEPOSIT

INSURANCE
CORPORATION LAW
(A Reviewer)

Republic Act No. 3591 otherwise known as the PHILIPPINE

DEPOSIT INSURANCE CORPORATION (PDIC) LAW as amended
by Republic Act No. 9302, Republic Act No. 9576 and Republic
Act No. 10846

PREPARED BY:

Arches, Allyssa Nicole C.

Famisan, Ella Mae T.
Labaguis, Elyza Mashier O.
Lerona, Frits Daryl A.
Natividad, Jedrick M.
Portuguez, Jeremiah A.
Robea, April Christine F.
Samillano, Jenica S.
Sta. Isabel, Hazel S.

April 22, 2021

 DEFINITION OF TERMS
a. Asset - refers to movable, immovable, tangible or intangible resources or
properties over which a bank has equitable interest.
b. Asset Distribution - refers to the plan of distribution of assets of a closed bank to its
Plan creditors, based on its estimated realizable value as of a certain cut-off
date.
➢ Partial – distribution of a portion of the assets
➢ Final – distribution of all the assets
c. Bank and Banking - shall include banks, commercial banks, savings banks, mortgage
Institution banks, rural banks, development banks, cooperative banks, stock
savings and loan associations
d. Closed bank - refers to a bank placed under liquidation by the monetary board
e. Creditor - refers to any individual or entity with a valid claim against the assets
of a closed bank.
f. Deposit - the unpaid balance of money or its equivalent received by a bank in
the usual course of business and for which it is obliged to give credit
to a commercial, checking, savings, time or thrift account.
➢ Any obligation of a bank which is payable at the office of the
bank located outside of the Philippines shall not be a deposit
nor part of insured deposits, unless the bank elects to include
for insurance its deposit obligations payable only at such
branch
g. Disputed claim - refers to a claim against the assets of a closed bank, or for specific
performance, or breach of contract, or damages, which is denied by
the receiver.
h. Insured bank - any bank whose deposits are insured.
i. Insured deposits - the amount due to any bonafide depositor for legitimate deposits in an
insured bank as of the date of closure but not to exceed P500,000
j. Liquidation court - refers to the Regional Trial Court of general jurisdiction where the
petition for assistance in the liquidation of a closed bank is filed
k. Payout - refers to the payment of insured deposits
l. Purchase of assets - refers to a transaction where an insured bank purchases asset and
and Assumption of assumes liabilities of another bank under resolution or liquidation
liabilities
m. Receiver - refers to the Corporation or any of its duly authorized agents acting as
a receiver of a closed bank
n. Records - include all documents, titles, papers, and electronic data of the closed
bank.
o. Residual assets - refers to assets, in cash or in kind, to be turned over to the closed
bank’s stockholders of record, in proportion to their interest in the
closed bank as of date of closure after payment of liquidation costs,
fees and expenses, and claims and surplus to all creditors.
p. Resolution - actions undertaken by the Corporation to:
➢ Protect depositors, creditors and the DIF.
➢ Safeguard the continuity of essential banking services.
➢ Prevent deterioration of bank assets
q. Risk- based - pertains to a method for calculating an insured bank’s assessment on
assessment system the probability that DIF will incur a loss
r. Statement of - refers to a report of financial condition of a closed bank at a given date
Affairs
s. Surplus dividends - refers to the remaining assets of the closed bank after satisfaction in
full of all the liquidation cost, fees and expenses, and valid claims
t. Takeover - the act of physically taking possession and control of the premises,
assets and affairs of a closed bank for the purpose of liquidation
u. Transfer deposit - a deposit in an insured bank made available to a depositor by the
Corporation as payment of insured deposit of such depositor in a
closed bank and assumed by another insured bank
v. Trust funds - funds held by an insured bank in a fiduciary capacity
w. Valid claim - the claim recognized by the receiver or allowed by the liquidation
court

SECTION 1: The Creation of PDIC

Philippine Deposit Insurance Corporation (PDIC)

- A corporation whicih shall insure the deposits of all banks which are entitled to the benefits of
insurance under this act, and shall have the powers granted in this act.

BASIC POLICY: Providing insurance coverage on all insured deposits

To promote & safeguard the
interests of the depositing
Helping maintain a sound and stable banking system
public by:

SECTION 2: State Policy

a. To strengthen the mandatory deposit insurance coverage system to generate, preserve,
maintain faith & confidence in Philippine Banking system
b. To protect it from illegal schemes & machinations

DEPOSIT INSURER- providing permanent and

continuous insurance coverage all insured deposit

Functions of PDIC: CO- REGULATOR OF BANKS- PDIC is empowered to

to act as examing & investigate banks

RECEIVER & LIQUIDATOR OF CLOSED BANKS- shall

control, manage, & administer the affairs of the
bank

SECTION 3: BOD Composition & Authority

Qualification to be appointed as Member of BOD: he/she must be

1. Of good moral character

2. Of unquestionable integrity & responsibility
 3. Be of known probity & patriotism
4. Is of recognized competence in economics, banking & finance, management administration, law
& insurance
5. At least 35 years old
• He/she shall be prohibited to hold any office/position/employment in any insured bank.
• Appointment to any vacancy shall only be the unexpired term of predecessor
Members of Board of Directors

Secretary of Finance

- The ex-officio Chairman of the

Board
- No compensation
President of the Corporation
Governor of BSP
- The ex-officio Vice- Chairman of
- The ex-officio member of the
the Board
Board
- Appointed by the President of
the Philippines - No compensation
- 6-year term

4 Members from Private Sector

- Appointed by the President of the

Philippines
- 6-year term unless sooner
removed

Removal of any appointed member of BOD: the President of the Philippines may remove any appointive
member of BOD if the member:

1. Is physically / mentally incapacitated (more than 6months)

2. Is guilty of acts/operations which are fraudulent/illegal, or which opposed the aims & interests
of PDIC
3. No longer possess the qualification specified
4. Does not meet the standards for performance based on evaluation by Governance Commission
for GOCCs

SECTION 4: President of the Corporation- Compensation, Powers & Duties

The PRESIDENT of the Salary (fixed by PH President)
CORPORATION is also its VICE + allowances
CHAIRMAN of the BOARD OF + benefits
DIRECTORS. His absence is + other emolument_________
Shall be higher than the
subject to OIC appoint of the
compensation package of the next
BOD. highest ranking executive of PDIC
Powers & Duties of the President Authority of Board of Directors
1. To prove & issue rules and regulations
1. To prepare for agenda of the meeting of for banks & depositing public
BOD 2. To act as policy-making body of PDIC &
2. To execute & administer the policies & constitute Board Committees to
measures approved by BOD oversee the operations &
3. To direct & supervise the operations & administrations of PDIC
internal administration of PDIC in 3. to establish HR management system
accordance with policies of BOD 4. to approve compensation structure
4. To represent the PDIC in all dealings 5. to appoint, establish, rank, fix
with other government offices, agencies remuneration, & benefits , & remove
and instrumentalities, and with other officer/employee for a cause
persons 6. to approve policy on local and foreign
5. To authorize contracts entered by the travel, its expenses, allowances, and per
corporation, notes & securities issued, diems
annual reports, FS and other documents 7. to adopt an annual budget, authorize
of PDIC such expenditures by PDIC
6. To represent the corporation, either 8. to approve the target level of DIF and
personally or through counsel as the method to determine reserves for
authorized by BOD, in any legal insurance & financial assistance losses
proceeding/action 9. to review the organizational set-up of
7. To delegate his power to represent PDIC and adopt new/revised
PDIC as provided above, to other organizational structure
officers of PDIC 10. to design, adopt, revise (as needed) an
8. To exercise such powers as may be early separation plan for employees of
vested in him by the BOD. PDIC, and provide incentives for those
separated from their service.
11. To promote & sponsor the local and
foreign training or study of personnel in
field of banking, finance, management,
IT and law
SECTION 6: Deposit Insurance Coverage
Under Section 6 of this Act, the deposit liabilities of any bank engaged or will engage in the
business of receiving deposits, shall be insured by the Corporation. However, the Corporation shall not
pay deposit insurance for the following accounts or transactions:

1. Investment products
2. Fictitious or fraudulent deposit accounts or transactions
3. Deposit accounts or transactions constituting and/or emanating from, unsafe and unsound
banking practices.
4. Deposits that are proceeds of an unlawful activity.
When the BSP determines that a bank is capital deficient, the PDIC may conduct an insurance
risk evaluation which includes the determination of the following:
 i. Fair market value of assets and liabilities
ii. Risk classification
iii. Possible resolution modes
In determining the amount of insurance due to any depositor, the following rules shall apply:

1. Single Account
Bank A -
Time
Deposit by
Juan Cruz Bank A -
Bank A -
Demand
Savings by
Deposits by
Juan Cruz
Juan Cruz All deposits maintained in the
same Bank in the same right and
MDIC -
capacity, regardless of account
P500,000
type shall be added together and
be covered by up to P500,000.

2. Joint Account – shall be insured separately from any individually-owned deposit accounts.

Joint Account by 2 or
The maximum insured deposit shall be divided
more Natural person/ by into as many equal shares as there are
2 or more Juridical individuals, juridical person or entities, unless a
person /entities different sharing is stipulated in the document of
deposit.
.

The maximum insured deposit shall be presumed

Joint Account held by a
to belong entirely to such Juridical person or
Juridical person/entity
with a Natural person entity.

The aggregate of the interest of each co-owner over several joint accounts shall likewise be
subjected to the maximum insured deposit of P500,000.

SECTION 7: ASSESSMENT OF MEMBER BANKS

(a) Assessment Rate
• It shall be determined by the Board of Directors and shall not exceed one-fifth of 1% per
annum or simply, 0.2% per annum.
Assessment Base
 • It shall be the total liability of the bank for deposits defined under subsection (g) of
section 5 without any deduction for indebtedness of depositors.
Semi-annual Assessment for Each Insured Bank
𝐴𝑠𝑠𝑒𝑠𝑠𝑚𝑒𝑛𝑡 𝑅𝑎𝑡𝑒
• 𝐴𝑠𝑠𝑒𝑠𝑠𝑚𝑒𝑛𝑡 𝐵𝑎𝑠𝑒 × 2
• It shall not be less than five thousand pesos (P5,000.00).

The Board of Directors may establish a risk-based assessment system and impose a risk-based
assessment rate which shall not exceed two-fifth of 1% per annum or simply, 0.4% per annum.

Assessment base of the bank as of March 31 P XXX

Add: Assessment base of the bank as of June 30 XXX
Total assessment base P XXX
Divided by: 2
Semi-annual assessment base for one semi-annual period P XXX

Assessment base of the bank as of September 30 P XXX

Add: Assessment base of the bank as of December 31 XXX
Total assessment base P XXX
Divided by: 2
Semi-annual assessment base for the other semi-annual period P XXX

In case where any of the said dates is a non-business day or legal holiday, either national or
provincial, the preceding business day shall be used.
Certified Statement
• Required to be filed with the Corporation under subsection (b) and (c) of this section
• It shall be in such a form and set forth the information prescribed by the Board of
Directors.
Assessment of Payments
• Required from insured banks under subsection (b) and (c) of this section
• It shall be made in such a manner and such a time prescribed by the Board of Directors.
(b) Certified Statement
• It shall contain or be verified by a written declaration that it is made under the penalties
of perjury.
• Each insured corporation shall file with the Corporation, on or before July 31, a certified
statement showing for the six months ending on the preceding June 30 the amount of
the assessment base and the amount of the semi-annual assessment due to the
Corporation for the period ending on the following December 31, determined in
accordance with subsection (a) of this section.
• On or before January 31, each insured corporation shall file with the Corporation a
similar certified statement for the six months ending on the preceding December 31 and
shall pay to the Corporation the amount of the semi-annual assessment for the period
ending on the following June 30 which it is required to certify.
(c) When will a bank not be required to file any certified statement or pay any assessment?
• Each bank which becomes an insured bank shall not be required to file any certified
statement or pay any assessment for the semi-annual period. Upon expiration of such
period, each such bank shall comply with the provisions under the subsection (b) of this
 section except that the semi-annual assessment base of the bank as of the close of
business in the preceding June 30 or December 31, whichever is applicable.
Does the assessment base include liabilities for deposits assumed by such bank from another
bank or banks?
• Yes, it shall be included in the assessment base.
(d) All assessment collections and income from operations after expenses and charges shall be
added to the DIF.
What are these expenses and charges?
(1) Operating costs and expenses of the Corporation for the calendar year
(2) Additions to reserve to provide for insurance and financial assistance losses, net of
recoverable amounts from applicable assets and collaterals
(3) Net insurance and financial assistance losses sustained during the calendar year
(e) The Corporation may:
(1) Refund to an insured bank any payment of assessment in excess of the amount due to
the Corporation; or
(2) Credit such excess towards the payment of the assessment due from such bank and
upon succeeding assessments until the credit is exhausted
(f) What happens if an insured bank failed to file any required certified statement?
• The insured bank may be compelled to file such statement by mandatory injuction or
other appropriate remedy in a suit brought for such purpose by the Corporation against
the bank and any officers thereof in any court of the Philippines with competent
jurisdiction where such bank is located.
(g) Can the Corporation recover from an insured bank the amount of unpaid assessment due?
• Yes, the Corporation is entitled to recovery whether or not such bank have filed any
such certified statement and whether or not a suit have been brought to compel the
bank to file any such statement.
Can an action or proceeding be brought for recovery of any assessment due to the
Corporation or for the recovery of any amount paid to the Corporation in excess of the
amount due to it?
• Yes, as long as the action or proceeding is brought within 5 years after the right accrued
for which the payment is made, except where the insured bank had made or filed with
the Corporation a false or fraudulent certified statement with the intent to evade, in
whole or in part, the payment of assessment. In such a case, the claim shall not have
been deemed to have accrued until the discovery by the Corporation that the certified
statement is false or fraudulent.
(h) What will happen if the insured bank fail or refuse to pay any assessment due and did not
correct such failure or refusal within 30 days after the written notice has been given by the
Corporation to the insured bank?
• At its discretion, the Corporation may file a case for collection before the appropriate
court without prejudice to the imposition of administrative sanctions allowed under the
provisions of this law on the bank officials responsible for the non-payment of
assessment fees.
(i) The Corporation shall have the authority to collect a special assessment from any member bank
and prescribe the terms and conditions thereof to maintain the target level of the DIF set by the
Board of Directors.
SECTION 8: SANCTIONS AGAINST UNSAFE AND UNSOUND BANKING
PRACTICES
(a) When upon examination of the Corporation, it was found that an insured bank or its directors or
agents have committed, are committing or about to commit unsafe or unsound practices in
conducting the business of the banks, or have violated, are violating or about to violate any
provisions of any law or regulation to which the insured bank is subject, the Board of Directors
shall submit the report of the examination to the Monetary Board to secure corrective action
thereon.
Did the Monetary Board take corrective action within 45 days from submission of the report?
• If yes, implement the corrective action.
• If no, the Board of Directors shall, motu propio, institute a corrective action which it
deems necessary and duly inform the Monetary Board of such action. The Board of
Directors may thereafter issue a cease-and-desist order, and require the bank or its
directors or agents concerned to correct the practices or violations within 45 days.
Does the practice or violation likely to cause insolvency or substantial dissipation of assets or
earnings of the bank, or is likely to seriously weaken the condition of the bank or otherwise
seriously prejudice the interests of its depositors and the Corporation?
• If yes, the period for the Monetary Board to take corrective action shall not be more
than 15 days.
• If no, the period for the Monetary Board to take corrective action shall be within 45 days
from the submission of the report.
(b) The actions and proceedings in the preceding subsections may be undertaken by the
Corporation if, in its opinion, an insured bank or its directors or agents have violated, are
violating or about to violate any provisions of this Act or any order, rule or instruction issued by
the Corporation or any written condition imposed by the Corporation in connection with any
transaction or grant by the Corporation.
(c) Did the insured bank complied, within 30 days from notice, with any cease-and-desist order
issued by the Corporation or with any corrective action imposed by the Monetary Board in
relation to a deposit-related unsafe and/or unsound banking practice?
• If yes, the insured status of the bank shall be maintained.
• If no, the insured status of the may be terminated by the Corporation. Such termination
shall be final and executory, and shall be effective upon the publication of the notice of
termination in a newspaper or a general circulation.
What will happen to the deposits of each depositor in the bank upon termination of the
bank’s insured status?
• The deposits in the bank existing on the effective date of the termination of insurance
coverage, less all subsequent withdrawals, shall continue to be insured up to the
maximum deposit insurance coverage for
What will happen to the additions to, or renewal of, existing deposits and new deposits in
such bank after the effective date of the termination of the bank’s insured status?
• These items shall not be insured by the Corporation. Hence, the bank shall not advertise
or represent that additions to, or renewal of, existing deposits and new deposits made
after the effective date of termination are covered by deposit insurance.

SECTION 9: POWERS AS A CORPORATE BODY

The Corporation as a corporate body shall have the power:

(1) To adopt and use a corporate seal

(2) To have succession until dissolved by an Act of Congress
(3) To make contracts
(4) To sue and be sued, complain and defend, in any court of law in the Philippines. All suits of a
civil nature to which the Corporation shall be part shall be deemed to arise under the Philippine
laws. No attachment or execution shall be issued against the Corporation or its property before
final judgment in any suit, action, or proceeding in any court. The Board of Directors shall
designate an agent upon whom service of process may be made in any province or city or
jurisdiction in which any insured bank is located
(5) For its Board of Directors to appoint officers and employees not provided for in this Act and to
define their duties, fix their compensation, require bonds of them and fix penalty thereof and to
dismiss such officers and employees for cause.
(6) For its Board of Directors to prescribe by-laws consistent with law, regulating the manner in
which its general business may be conducted, and the privileges granted to it by law may be
exercised and enjoyed
(7) For its Board of Directors or duly authorized officers or agents to exercise all powers specifically
granted by the provisions of this Act, and such incidental powers as shall be necessary to carry
on the powers so granted
(8) To conduct examinations of banks with prior approval of the Monetary Board.
When should examinations be conducted?
• At least 12 months from the last examination
If there is a threatened or impending closure of a bank, will there be a special examination?
• Yes, in coordination with the BSP and by an affirmative vote of majority of all the
members the Board.
If there is a finding of unsafe or unsound banking practice, what shall be done?
• The Corporation and/or the BSP may inquire into or examine deposit accounts and all
information related thereto.
(9) To act as a receiver
(10)For its Board of Directors to prescribe rules and regulations as it may deem necessary to carry
out the provisions of this Act.
(11)To establish its own provident fund. The Board of Directors shall prepare and issue rules and
regulations as it may deem necessary to make effective the establishment and operation of the
provident fund.
What is a provident fund?
• It shall consist of contributions made both by the Corporation and by its officers and
employees to a common fund for the payment of benefits to such officers or employees
or their heirs.
(12)To compromise, condone or release, in whole or in part, any claim or settled liability to the
Corporation, regardless of the amount involved, under such terms and conditions as may be
imposed by the Board of Directors, and to write off the Corporation’s receivables and assets
which are no longer recoverable or realizable.
(13)To determine qualified interested acquirers or investors for any of the modes of resolution or
liquidation of banks
(14)To determine the appropriate resolution method and to implement the same for a bank subject
to resolution
(15)To determine the appropriate mode of liquidation of a closed bank and to implement the same
SECTION 13: AUTHORITIES OF A RECEIVER AND EFFECTS OF PLACEMENT OF
A BANK UNDER LIQUIDATION
a) The Corporation, as a receiver is authorized to ADOPT AND IMPLEMENT any or a combination
of the ff. modes of liquidation.
Note: even WITHOUT the consent of stockholders, board of Directors, creditors or depositors of
the closed bank.
1. Conventional Liquidation; and
2. Purchase of assets and/or assumption of liabilities

b) The Corporation as a receiver of a closed bank, is EMPOWERED to

Note: “it” represents the closed bank
1. Represent and act for and on behalf of it.
2. Gather, take charge, and administer its assets, records and affairs for the benefit of its
creditors.
3. Convert its asset to cash or highly liquid assets
4. Enforce liabilities of the directors, officers, employees, agents and other entities; and
collect, recover, and preserve all of its assets
5. Appoint or hire person or entities of recognized competence to perform such powers and
functions of the Corporation as its receiver, or assist on the performance thereof.
6. Appoint or hire competent forensic and fraud investigators
7. Pay from its available funds the accrued utilities, rentals and salaries of its personnel for a
period not exceeding 3 mos.
8. Collect loans and other claims; modify, compromise or restructure their terms and
conditions (as may be deemed advantageous for the creditors)
9. Hire or retain private counsel (as may be necessary)
10. Borrow or obtain a loan/mortgage/pledge, or encumber any of its asset when necessary
to;
10.1. Preserve or prevent their dissipation
10.2. Redeem foreclosed asset
10.3. Minimize losses of its depositors and creditors
11. Exercise powers to reduce the interest rate to a reasonable rate (if the interests on deposits
are unusually high). Note: Modifications only apply to earned and unpaid interest
12. Utilize its available funds and funds generated from the conversion of assets to pay for
reasonable cost and expenses incurred for preservation of its assets and liquidation (without
the need of court approval)
Note: For banks with insufficient funds, Corporation is authorized to advance the costs and
expenses
13. Charge reasonable fees for liquidation and advances from its assets. Note: Payment must be
approved first by the liquidation court.
14. Distribute available assets (in cash or in kind) to creditors in accordance with the Rules on
Concurrence and Preference of Credits under the Civil Code or other laws.
15. Dispose bank records no longer needed in the liquidation according to PDIC Board of
Directors, NOTWITHSTANDING the laws on archival period and disposal of records; and
16. Exercise other powers necessary for effective discharge of duties of the Corporation as
receiver.
c) The Corporation shall PAY SURPLUS, if any, dividends at the legal rate of interest from date of
takeover to date of distribution to creditors and claimants, in accordance with the Rules on
Concurrence and Preference of Credits under the Civil Code or other laws before the
distribution. Note: this is after payment of all liabilities and claims
d) The receiver’s officers/employees/deputies/assistants and agents shall have NO LIABILITY and
shall not be subject to any action/claim/ demand to any action done or omitted in good faith.
e) EFFECTS of placing the bank under liquidation
1. On the corporate FRANCHISE OR EXISTENCE
o Upon placement of the Monetary Board of a bank under liquidation, it shall
continue as a body corporate (only up to the winding-up period)
o This continuation is only for purpose of;
✓ Liquidating
✓ Settling and closing of affairs
✓ Disposal, conveyance or distribution of assets
o In no case shall the bank be reopened after being placed to liquidation
2. On the powers and functions of its DIRECTORS, OFFICERS AND STOCKHOLDERS
o Their powers, voting rights, functions, and duties, as well as the allowances,
remuneration and perquisites are terminated upon closure.
o They are barred from interfering with the assets, records and affairs of the bank.

The receiver shall facilitate the liquidation for the benefit of all creditors.

3. On the ASSETS
o Deemed in custodia legis in the hands of the receiver
o Not be subject to attachment, garnishment, execution, levy or any other court
processes; or the court will be liable to Section 27 of this Act.
Note: collateral securing the loans and advances from the BSP is not included in the
assets for distribution.
Note: Excess proceeds of secured loans will be returned by the BSP to the receiver.
o No preference given to the attaching or garnishing party of preliminary attachment
or garnishment.
o Any preliminary attachment or garnishment shall be lifted or discharged upon
motion of receiver.
4. On LABOR RELATIONS
o Employer-employee relationship is terminated upon service of notice of closure
(notwithstanding Labor Code)
o Separation pay or benefits shall be taken from available assets of the bank.
5. CONTRACTUAL OBLIGATIONS
o Unnecessary contracts for orderly liquidation or those that are grossly advantageous
to the bank may be cancelled, terminated, rescinded or repudiated by the receiver.
6. On INTEREST PAYMENTS
o Liability of bank (to pay interest and all other obligations) will cease upon closure
without prejudice to the 1st paragraph of RA No. 7653 (The New Central Bank Act).
Note: Provided that the receiver have the authority to assign bank assets serving as
collaterals to be paid to secured creditors (include interest as of date of closure)
without the need for approval of the liquidation court.
7. Liability for PENALTIES AND SURCHARGES for late payment and nonpayment of taxes.
 o From time of closure, no longer liable for payment of penalties and charges arising
from late payment and nonpayment of the ff.;
✓ Real property taxes
✓ Capital Gains Tax
✓ Transfer Tax
✓ Similar Charges
8. BANK CHARGES AND FEES ON SERVICES
o Receiver may impose, on behalf of the bank, charges and fees for services rendered
after bank closure.(i.e. execution of pertinent deeds and certifications)
9. ACTIONS PENDING for or against the closed bank
o Upon motion of the receiver, actions pending for or against the bank will be
suspended for not exceeding 180 days and referred to mandatory mediation
o Upon termination of mediation, the case will undergo further proceedings
Note: Courts only apply to any court or quasi-judicial body, NOT SUPREME COURT.
10. FINAL DECISIONS against the closed bank
o Execution and enforcement of a final decision of a court (other than the liquidation
court) against the assets of a closed bank shall be stayed.
o Prevailing party shall file final decision as a claim to the liquidation court. (Settled in
accordance with the Rules on Concurrence and Preference of Credits under Civil
Code or other laws).
11. DOCKET and other court fees
o Payment of these relating to all cases or actions filed by the receiver (with judicial or
quasi-judicial bodies) shall be deferred, until final termination of action.
Note:
✓ If favorable-fees shall constitute as first lien
✓ If unfavorable – fees shall be paid as liquidation costs and expenses during
distribution of assets
12. All assets, records, and documents in the POSSESSION of the bank at the time of closure
o Deemed owned
13. The exercise of authority, functions, and duties by the receiver under this Act.
o Presumed performed in the normal course of business
14. ASSETS AND DOCUMENTS of the closed bank
o Shall retain its private nature
o Receiver’s exercise of its functions under this act is subject to visitorial audit only by
the COA.

SECTION 14: NOTICE OF CLOSURE AND TAKEOVER ACTIVITIES

a. Upon designation of the Corporation as receiver, it shall;
o Serve a notice of closure to; (in order of priority)
✓ Highest-ranking officer of the bank premises
✓ If absent; post the notice in the bank premises or in the main entrance
o Closure of the bank is deemed effective upon service of the notice.
o Receiver will take over and exercise its powers provided in this Act.
b. Receiver have the authority to use REASONABLE FORCE
o Has the authority to force open the premises.
o Take actual physical possession and custody of assets, records, documents.
o Take charge of bank’s affairs upon service of closure.
 c. Upon service of the notice of closure to the directors, officers, employees, or agents of the bank,
they shall have the duty to
o Account for, surrender, turn over and provide information relative to
✓ The assets
✓ Records
✓ And affairs in their possession/custody/administration/management
d. Upon request, the local government unit and law enforcement agencies should immediately
provide assistance to the receiver in serving the notice of closure.

SECTION 15: PURCHASE OF ASSETS AND ASSUMPTIONS OF LIABILITIES

a. Receiver has authority to facilitate and implement the purchase of assets and assumption of
liabilities by another insured bank;
o No need of approval of liquidation court
o In accordance with the Rules on Concurrence and Preference of Credits under Civil Code
or other laws.
o Disposition of licenses shall be subject to approval of BSP
b. Action of the receiver to determine if the bank is subject to a purchase of asset and assumption
of liabilities shall be FINAL AND EXECUTORY, and may not be set aside by any court.

Modes of Liquidation
Section 15-16

Modes of Liquidation

Purchase of Assets and

Conventional Liquidation
Assumption of Liabilities

Petition for
Asset
Assistance in the
Management and Winding-up
Liquidation of a
Conversion
Closed Bank

1. Purchase of Assets and Assumption of Liabilities

Authority of the receiver during purchase of assets and assumption of liabilities:

- Facilitate and implement the purchase of the assets of the closed bank and
assumption of its liabilities by another insured bank.
 General rule: The approval of the liquidation court for the facilitation and
implementation of such is not necessary.

Exception: Disposition of the branch licenses and other bank licenses of the
closed bank shall be subject to the approval of the Bangko Sentral ng
Pilipinas (BSP).

- Such action of the receiver shall be final and executory, and may not be set aside
by any court.

2. Conventional Liquidation

A. Asset Management and Conversion

- Assets gathered by the receiver shall be evaluated and verified as to their
existence, ownership, condition, and other factors to determine their
realizable value.
- The receiver shall have the authority to invest funds received from the
conversion of the assets of the closed bank in:
a. government securities;
b. other government-guaranteed marketable securities; or
c. investment-grade debt investments.
Exception: Proceeds of the sale of the bank and branch licenses – shall
be for the benefit of the creditors of the closed bank.

Authority of the receiver during asset and management conversion:

1) Represent the closed bank before the Land Registration Authority (LRA),
the Bureau of Lands, the Register of Deeds, the Land Transportation
Office (LTO), the Assessor’s Office or other appropriate office of the local
government unit, the Securities and Exchange Commission (SEC), or
such other similar government agencies or private entities in:

i. Verifying the authenticity of ownership documents;

ii. Registering the interest of the closed bank on a specific
property;
iii. Consolidating ownership over an asset of the closed bank;
iv. Securing certified true copies of documents held by the
foregoing agencies/entities in relation to an asset of the closed
bank;
v. Securing the appropriate certification from the foregoing
agencies/entities in relation to an asset of the closed bank; and
 vi. Performing other related activities;

2) Conduct a physical or ocular inspection of the properties owned by, or

mortgaged to, the closed bank, to determine their existence and present
condition;
3) Determine the disposal price of assets in accordance with generally
accepted valuation principles, standards and practices, subject to such
guidelines as the receiver may determine;
4) Dispose real or personal properties of the closed bank through bidding,
negotiated sale or any other mode including lease with option to purchase,
whether by piece or by lot, as may be reasonably determined by the
receiver based on cost-benefit considerations and to allow efficient
distribution of assets to creditors; and
5) Engage third parties to assist in the liquidation, manage and/or dispose
the assets, handle cases filed against or by the closed bank, subject to
such guidelines as determined by the receiver.

Rules for the management and/or conversion of the assets of the closed
bank:

1) Transactions affecting the assets of the closed bank without the consent
of the receiver shall not be allowed upon notification of the closure of the
bank.
2) Any person or entity in custody or possession of assets or records of the
closed bank shall, upon issuance by the Monetary Board of the resolution
ordering the closure of the bank:
i. immediately turnover custody of said assets and records to the
receiver;
ii. hold the said assets or records in trust for the receiver pending
recovery; and
iii. not allow, authorize or cause the withdrawal, transfer, disposition,
removal, conversion, concealment, or other transaction involving or
relating to the subject asset, unless otherwise directed by the
receiver.

B. Petition for Assistance in the Liquidation (PAL) of a Closed Bank

- A special proceeding for the liquidation of a closed bank, and includes the
declaration of concomitant right of its creditors, and the order of payment
of their valid claims in the disposition of its assets.
Liquidation Court

- Has the exclusive jurisdiction to adjudicate disputed claims against the

closed banks, assist in the enforcement of individual liabilities of the
stockholders, directors and officers, and decide on all other issues as may
be material to implement the distribution plan adopted by the Corporation
for general application to all closed banks.

General procedures for the implementation of PAL:

Filing of claims against Filing of Petition for

Issuance of order
the assets of the Assistance in
giving due course to
closed bank by all Liquidation (PAL) of a
the PAL by the
persons or entities closed bank by the
Liquidation Court.
with the receiver receiver

Submission of final
Issuance of order report on the
Termination of the
approving the final implementation of the
PAL
asset distribution plan approved final asset
distribution plan

1) Filing of claims against the assets of the closed bank by all persons or
entities with the receiver
- Must be done within sixty (60) days from the date of publication of
notice of closure.
- Claims filed outside the prescribed period shall be disallowed.
- If denied: Claims shall be filed with the liquidation court within sixty
(60) days from receipt of the final notice of denial of claim.
2) Filing of Petition for Assistance in Liquidation (PAL) of a closed bank by
the receiver
- Must be done not later than one hundred eighty (180) days from the
date of publication of notice of closure.
- The petition shall be filed in the RTC which has the jurisdiction over
the principal office of the closed bank or the principal office of the
receiver, at the option of the latter.
3) Issuance of order giving due course to the PAL by the Liquidation Court
- Issued after complying with the jurisdictional requirements of the
court and within a period of not more than ten (10) days from the date
of the order submitting the PAL for resolution
 - The Liquidation Court shall have the authority to receive and pass
upon claim against the assets of the bank, monitor the timely reports
of the receiver and approve the Asset Distribution Plan.
4) Issuance of order approving the final asset distribution plan
- Contingent claim
- A claim whose validity has not yet been determined with finality at
the time of the submission of the final asset distribution plan.
- Shall not be paid under the proposed final asset distribution plan.
5) Termination of the PAL
- Effective upon the finality of the order approving the final asset
distribution plan.
- The receiver, its officers, employees or agents, are forever
discharged from any claim and/or liability arising from or in
connection with the liquidation of the closed bank.
6) Submission of final report on the implementation of the approved final
asset distribution plan
- Submitted to the Monetary Board and the SEC after the expiration of
the winding-up period.

C. Winding-up

Individual Stockholders of
record/duly authorized
Creditors representative/court-
appointed stockholder’s
representative
Purpose Claim payment of the
principal obligations and Claim the residual assets
surplus dividends
Prescribed
Six (6) months from the date of publication of notice of the
period
approval by the court of the final asset distribution plan of the
closed bank.
Actions deemed
as abandonment Failure of the creditor/stockholder to comply with the
or waiver of right documentary requirements
to payment (for
creditors) or right
to residual
assets (for Refusal to accept the asset as payment (for creditors) or the
stockholders) residual asset (for stockholders).
 After the lapse of All assets which remain unclaimed by the creditors and/or
the period stockholders of record shall be turned over to the Bureau of
Treasury.
Duties of the During the six-month period:
receiver - Hold as trustee the assets allocated in the final asset
distribution plan for said creditors and stockholders of
record.
- Continue to keep all the pertinent records of the closed
bank.
After the lapse of the period:
- Authorized to dispose of the pertinent records of the
closed bank in accordance with the rules and regulations
to be prescribed by the receiver.

Deposit Insurance Fund

- Shall be considered as the capital account of the corporation.

- Shall be built up and maintained at the target level set by the PDIC, subject to
periodic review and may be adjusted as necessary.
- principally consists of:

Permanent
Shall be three billion pesos (P3,000,000,000.00)
Insurance Fund
Assessment rate:

Per annum: shall not exceed one-fifth (1/5) of one per centum
(1%) per annum.

Semi-annual: shall be in the amount of the product of one-half

Assessment
(1/2) multiplied by the assessment base but in no case shall it
Collections
be less than Five thousand pesos (P5,000.00)

Assessment base:

Shall be the amount of the liability of the bank for deposits

without any deduction for indebtedness of depositors

Reserves for
Insurance and Shall be maintained at a reasonable level to ensure capital
Financial Assistance adequacy.
Losses
Retained Earnings

Provisions for Permanent Insurance Fund and Assessment Collections

- The Corporation may, every five (5) years, conduct a study on the need to adjust
the amount of the Permanent Insurance Fund, insurance cover, assessment rate
and assessment base and thereafter make the necessary recommendation to the
Congress
- The Corporation may hire the services of actuarial consultants to determine,
among others, the affordability of assessment rates, analysis and evaluation of
insurance risk, and advisability of imposing varying assessment rates or
insurance cover of different bank categories.

Provisions for Dividend Declaration

- Dividends shall be remitted to the national government only if the target DIF level
for the applicable year has been reached.
- Dividend rate shall be at least fifty percent (50%) of the income from sources
except assessment collections.
Payment of Insured Deposits
Section 19-21

• By cash
• By making available to each depositor a transferred deposit in another
Modes of insured bank in an amount equal to insured deposit of such depositor
payment

• PDIC, in its discretion, may require proof of claims to be filed

• PDIC may require final determination of a court of competent
Before jurisdiction, if it is not satisfied as to the validity of a claim
payment

• PDIC shall be subrogated to all rights of the depositor against the

Effect of closed bank to the extent of such payment
payment
▪ Period for the PDIC to settle claim: 6 months from the date of filing of the claim

▪ Failure to settle claim within 6 months from the date of filing of claim for insured
deposit, where such failure was due to grave abuse of discretion, gross
negligence, bad faith or malice, shall upon conviction, subject the directors,
officers or employees of PDIC responsible for the delay, to imprisonment from 6
months to 1 year.

Except: that the period shall not apply if the validity of the claim requires the
resolution of issues of facts and/or law by another office body or agency.

▪ Subrogation shall include the right on the part of the PDIC to receive:
a. Same dividends and payments from the proceeds of the assets of such
closed bank
b. Recoveries on account of stockholders’ liability as would have been payable
to the depositor on a claim for the insured deposits
Provided, That such depositor shall retain his or her claim for any uninsured
portion of his or her deposit, which legal preference shall be the same as that of
the subrogated claim of the PDIC for its payment of insured deposits.

▪ All payments by the PDIC of insured deposits in closed banks partake of the
nature of public funds and must be considered a preferred credit in the order of
preference under Article 2244 (9) of the New Civil Code.

Under Section 21:

▪ The PDIC shall commence the determination of insured deposits due the
depositors of a closed bank upon its actual takeover of the closed bank.

▪ Payment of an insured deposit to any person by the PDIC shall discharge the
latter, 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 the 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.

▪ Except as otherwise prescribed by the Board of Directors, neither the PDIC

nor such other insured bank shall be required to recognize as the owner of
any portion of a deposit appearing on the records of the closed bank.
 ▪ The PDIC may withhold payment of such portion of the insured deposit of any
depositor in a closed bank as may be required to provide for the payment of:
a. any liability of such depositor as a stockholder of the closed bank
b. any liability of such depositor to the closed bank or its receiver, which
is not offset against a claim due from such bank, pending the
determination and payment of such liability by such depositor or any
other liable therefor.

▪ All rights of the depositor against the PDIC with respect to the insured deposit
shall be barred, unless otherwise waived by the PDIC, if the depositor in the
closed bank:
1. Shall fail to claim his insured deposits with the PDIC within two (2) years
from actual takeover of the closed bank by the receiver
2. does not enforce his claim filed with the corporation within two (2) years
after the two-year period to file a claim as mentioned herein above

▪ However, all rights of the depositor against the closed bank and its
shareholders or the receivership estate to which the PDIC may have become
subrogated, shall thereupon revert to the depositor.
Corporate Funds and Assets
Section 22

Funds and Assets of PDIC

Shall be invested in (if not

Shall be kept with
employed)

Obligations of Republic of
the Philippines
BSP/other bank designated as
depository or fiscal agent of
the Philippine government
Obligations guaranteed as
to principal and interest

Debt instrument
denominated in foreign
currencies

Debt instruments denominated

in freely convertible foreign
currencies
 A. Money of PDIC denominated in the local currency, not otherwise employed,
shall be invested in:
- Obligations of the Republic of the Philippines
- Obligations guaranteed as to principal and interest by the Republic of
the Philippines.
- Debt instrument denominated in foreign currencies issued and
guaranteed by the Republic of the Philippines
- Debt instruments denominated in freely convertible foreign currencies
issued by supranationals, multilateral agencies or foreign governments

B. The banking or checking accounts of the Corporation shall be kept with the
Bangko Sentral ng Pilipinas, or with any other bank designated as depository
or fiscal agent of the Philippine government.

C. It is thereby declared to be the policy of the State that the Deposit Insurance
Fund of the Corporation shall be preserved and maintained at all times.

D. Assets of PDIC shall be exempt from attachment, garnishment or any other

process of any court, agency or any other administrative body.

Financial Assistance

E. The PDIC is also authorized to make loans to, or purchase assets of, or
assume liabilities of, or make deposits in:
- bank in danger of closing
- qualified investor
- surviving or consolidated institution that has merged or consolidated
with a bank in danger of closing

▪ PDIC prior to the exercise of the powers under Section 22, shall determine
that actual payoff and liquidation thereof will be more expensive than the
exercise of this power.

Provided, that when the Monetary Board has determined that there are
systemic consequences of a probable failure or closure of an insured bank,
the PDIC may grant financial assistance to such insured bank.

▪ A systemic risk refers to the possibility that failure of one bank to settle net
transactions with other banks will trigger a chain reaction, depriving other
 banks of funds leading to a general shutdown of normal clearing and
settlement activity.

▪ Systemic risk also means the likelihood of a sudden, unexpected collapse of

confidence in a significant portion of the banking or financial system with
potentially large real economic effects.

Authority to Borrow
Section 23

▪ PDIC is authorized to borrow from BSP and BSP is authorized to lend to the
PDIC on terms agreed upon by the two organizations.

▪ Funds borrowed are dependent upon the judgment of the Board of Directors
of the PDIC regarding the time to time required funds for insurance purposes
and financial assistance provided for in Section 22(c) of this PDIC Charter.

▪ When in the judgment of the Board of Directors the funds of PDIC are not
sufficient to provide for an emergency or urgent need to attain the purposes of
the PDIC Charter, the PDIC is likewise authorized to borrow money, obtain
loans or arrange credit lines or other credit accommodations from any bank
designated as depository or fiscal agent of the Philippine Government

Issuance of Bonds, Debentures and Other Obligations

Section 24

▪ PDIC is authorized to, upon the approval of the Philippine President and
recommendation of the Department of Finance , issue the following:
- Bonds
- Debentures; and
- Other obligations, both local or foreign, as may be necessary for purposes
of providing liquidity for settlement of insured deposits in closed banks

Provided, that the Board of Directors shall determine the interest rates, maturity
and other requirements of said obligations

Provided further, that PDIC shall provide for appropriate reserves for the
redemption or retirement of said obligation.

▪ Notes, debentures, bonds, or such obligations issued by the PDIC shall be:
 - exempt from taxation both as to principal and interest
- fully guaranteed by the Government of the Republic of the Philippines

▪ PDIC may issue notes, debentures, bonds, or other debt instruments without the
approval of the President, as long as these shall not be guaranteed by the
national government

▪ The Board of Directors shall have the power to prescribe the following:
- terms and conditions
- rules and regulations for the issuance, reissuance, servicing, placement
and redemption of the bonds authorized to be issued as well as the
registration of such bonds at the request of the holders thereof.
Reports
Section 25
The PDIC shall:
- annually make a report of its operations to the Congress after the 1 st day of
January;
- have its financial transactions audited by Commission on Audit (COA)
▪ conducted at place where accounts of the Corporation are normally kept.
▪ COA shall have access to all books, accounts, records, reports, files and
all other papers, things, or property belonging to the Corporation that are
necessary to facilitate the audit and shall be afforded full facilities for he's
buying transactions with the balance says aura securities held by third
party.
- Report of the Audit (for each fiscal year ending June 30)
▪ Prepared by the Auditor General of the Congress on or before January 15
▪ A copy shall be furnished to the Congress, President of the Philippines,
Governor of Bangko Sentral ng Pilipinas, and to the Corporation.

Statement of Assets and Liabilities, and Surplus or Deficit

R
E
P Statement of Surplus or Deficit Analysis
O
R
T Statement of Income and Expense

O
F Statement of Sources and Application of Funds
T
H Any recommendations, comments and information deemed
E necessary

A Any financial transactions in the course of audit, which in the

U opinion of the Auditor General, has been carried our without
authority of law.
D
I
Sanctions and Penalties

Section 26-27

I. Every insured bank shall display at each place of business maintained by it a

sign or signs, and shall include a statement in all its advertisement that its
deposits are insured by the Corporation.
II. Insured bank who remains in default in the payment of any assessment due to
the Corporation because of a dispute over the amount of such assessment shall
not be allowed to pay any dividend on its capital stock or interest (out of net
profits), or distribute any of its capital assets.
III. Without prior written consent by the Corporation, no insured bank shall:
a) merge or consolidate with any bank or institution;
b) assume liability made in any bank or institution;
c) transfer asset to any bank or institution.
IV. Assessment payable by any insured bank shall be subject to payment of interest
(legal rate for loans). In case of willful failure to pay the assessment and interest,
there shall be added a penalty equivalent the twice the amount of interest
payable for each day such violations continue.

Penalty Violation

I. Imprisonment of six (6) Any director, officer, employee or agent of a bank for:
to twelve (12) years, or a ▪ Willful refusal to submit reports as required by
fine of P50,000.00 to law, rules and regulations;
P10,000,000.00, or both ▪ Refusal to permit examination and audit of the
deposit records;
▪ Willful making of a false statement any bank
report required by PDIC;

▪ Submission of false material information relation

to any financial assistance of the Corporation
extended to the bank;
▪ Splitting of deposits or creation of fictitious or
fraudulent loans or deposit accounts.
Splitting of deposits occurs whenever;
a) deposit account with an outstanding
balance of more P500,000 is broken
down and transferred into two (2) or more
accounts in the name of persons or
entities with no beneficial ownership on
transferred deposits in their names
b) within 120 days immediately preceding or
during a bank-declared bank holiday, or
immediately preceding a closure order
 issued by the Monetary Board
c) for the purpose of availing of the
maximum deposit insurance coverage
▪ Refusal to receive the notice of closure;
▪ Refusal to allow the Corporation to take over a
closed bank;
▪ Refusal to turn over or destroying or tampering
bank records;
▪ Fraudulent disposal, transfer or concealment of
any asset, property or liability of the closed
bank;
▪ Violation of the exemption from garnishment,
levy, attachment or execution;
▪ Willful failure to comply with any provision of
this Act and/or conducting business in an
unsafe or unsound manner as may be
determined by the Board of Directors; or
▪ Any other acts inimical to the interest of the
bank or the Corporation shall be considered as
additional grounds for disqualification.

Any person for:

▪ Refusal to disclose information, records or
data pertaining to the bank accounts of a
closed bank to the receiver;
▪ Refusal to turn over possession or custody of
the asset and record of the closed bank to the
receiver,
▪ Refusal or delaying the:
i. Verification of authenticity of the
ownership documents;
ii. Registration of interest of the closed bank
on a specific property;
iii. Consolidation of ownership over an asset
of the closed bank;
iv. securing certified true copies of
documents and appropriate certification
from the agencies in relation to an asset
of the closed bank;
v. Conduct of a physical or ocular
inspection of the properties
vi. Other related activities of the receiver.
▪ Allowing the withdrawal from deposits or
disposition of any asset of the closed bank
other than by the receiver;
▪ Willfully violating any provision of this Act;
 ▪ Conspiring or willfully participating in any of the
offenses enumerated in Paragraph 1 of section
26.
Any law enforcement officer or local government
official who refuses or fails to assist the receiver in the
service of the notice of closure.
The Board of directors may impose administrative
fines not exceeding three times the amount of the
damage caused by the transaction.

II. Imprisonment of ten (10)

to twelve (12) years, or a Any depositor who files a fictitious and/or fraudulent
fine of P500,000.00 to claim for deposit insurance; and
P10,000,000.00, or both
Any bank officer who certifies to the validity of
fictitious and/or fraudulent deposit liabilities.
III. Imprisonment of twelve
(12) to fourteen (14) Any person who participates, or attempts to
years participate, in a scheme to defraud a bank
IV. Imprisonment of fifteen
(15) to seventeen (17) If the attempts to participate, in a scheme to defraud a
years bank have been committed by a director or officer of
the bank
V. Imprisonment of eighteen
(18) to twenty (20) years If the offense has resulted in systemic consequences,
as determined by BSP

Restraining Order or Injunction against the Corporation (Section 27)

- Only the Court of Appeals can issue any temporary restraining order, preliminary
injunction or preliminary mandatory injunction against PDIC for any action under
this act.
- The Supreme Court may issue a restraining order or injunction when the matter
is of extreme urgency involving constitutional issue.
- Any restraining order or injunction issued in violation of Section 27 shall be void,
no force and no effect.
- Any judge who will violate Section 27 shall suffer the penalty of suspension of at
least 60 days without pay.