PHILIPPINE DEPOSIT INSURANCE CORPORATION

PDIC is a government instrumentality created on June 22, 1963 by virtue of Republic Act 3591, as
amended, to insure the deposits of all banks. PDIC was created to “promote and safeguard the
interests of the depositing public by way of providing permanent and continuing insurance coverage
on all insured deposits.” The PDIC also aims to strengthen the mandatory deposit insurance coverage
system to generate, preserve and maintain faith and confidence in the country’s banking system, and
protect it from illegal schemes and machinations.

PDIC Address:
3rd - 10th Floor SSS Building 6782 Ayala Avenue, corner V.A. Rufino St, Legazpi Village, Makati, 1226
Metro Manila

I. Roles of PDIC

1) It shall ensure the deposits of all banks which are entitled to the benefits of insurance and
which shall have the powers granted by law.

2) It shall promote and safeguard the interests of the depositing public by way of providing
permanent and continuing insurance coverage on all insured deposits.

3) PDIC shall be entitled to the free use of Philippine mail in the same manner as the other
offices of the national government.

II. Powers of PDIC as a Corporate Body

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

a) all suits of a civil nature to which the corporation shall be a part shall deemed to
arise under the laws of the Philippines
b) no attachment or execution shall be issued against PDIC or its property before final
judgment in any suit, action or proceeding in any court
c) 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) to appoint by its Board of Directors such officers and employees as are not otherwise
provided by the law, 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) to prescribe By-Laws not inconsistent with law
7) to exercise all powers specifically granted by law
8) to conduct examination of banks
9) act as receiver
10) to prescribe such rules and regulations as it may deem necessary to carry out the
provisions of the PDIC law
 11) PDIC may establish its own provident fund which shall consist of contributions made both
by it 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
PDIC, regardless of the amount involved.

MANDATE

Consistent with its public policy objectives, the PDIC has the following mandates:

I. As State Deposit Insurer.

The Corporation provides deposit insurance of up to Php500,000.00, the maximum deposit insurance
coverage. Member-banks are assessed annually at a flat rate of 1/5 of 1% of their total deposit
liabilities. The assessments are collected from member-banks semi-annually and form part of PDIC’s
Deposit Insurance Fund (DIF).

II. As Co-Regulator of Banks.

PDIC works closely with the BSP in strengthening the banking system. PDIC is authorized to issue
regulations to implement its Charter, conduct bank examinations and investigations to determine
banks’ financial health and their adherence to rules and regulations on banking and deposit insurance,
and extend financial assistance to distressed banks.

III. As Statutory Receiver.

PDIC is the statutory receiver and liquidator of all closed banks. Upon order of the MB of the BSP,
PDIC takes over closed banks, administers their assets, records and affairs; and preserves and
disposes these assets for the benefit of the closed banks’ creditors. If the MB orders the liquidation of
a bank that has been placed under receivership, creditors’ claims against the bank are settled
according to the preference and concurrence of credits as provided by the Civil Code of the Philippines.

Membership with PDIC is mandatory for all banks licensed by the BSP to operate as such in
the Philippines.

- Banks incorporated under Philippine laws, such as commercial banks, development banks,
savings and loan associations, and rural cooperative banks.

- Domestic branches of foreign banks.

Scope of Deposit Insurance Protection

As a rule, PDIC provides deposit insurance of up to Php500,000.00 per depositor per bank. It covers
all types of bank deposits in member-banks denominated in both local and foreign currencies. As of
December 31, 2011, total deposits in the banking system amounted to Php5.4 trillion consisting of
43.7 million deposit accounts, 97.2% of the deposit accounts are fully covered by deposit insurance.

PDIC insures valid deposits in domestic offices of its member-banks, as follows:

By Deposit Type:
-savings
-special savings
 -demand/checking
-certificate of time deposits
By Deposit Account:
-single account
-joint account
-account “by”, “in trust for” (ITF) or “for the account of” (FAO) another person
By Currency:
-Philippine peso
-Foreign currencies considered as part of international reserves at the BSP

The following bank products are not covered by deposit insurance:

i. Certain bank products such as trust and investment products, bonds and securities, and
similar instruments

ii. Deposit accounts or transactions that:

a. are unfunded, or fictitious or fraudulent

b. emanated from or constituting unsafe and unsound banking practice/s as determined by the
PDIC in consultation with the BSP, after due notice and hearing and publication of PDIC’s
directive to cease and desist against such deposit accounts/transactions
c. are determined to be proceeds of unlawful activity as defined in the Anti-Money Laundering
Act (RA 9160, as amended)

Under PDIC Regulatory Issuance No. 2011-01, the PDIC shall deem a deposit-related
practice, activity, transaction, or omission to be an unsafe and/or unsound banking practice
when it has resulted or may result in:

1. Unreasonable delay in the processing or determination of the validity of deposit claims in the
event of bank closure; or
2. Material loss or damage or abnormal risk to the bank’s depositors, creditors, shareholders, or
to the PDIC; or
3. Material loss or damage or abnormal risk or danger to the safety, stability, liquidity, or
solvency of the bank.

The following activities may be considered unsafe and/or unsound deposit-related

practices:

1. Deposit related practice/activity/transaction without the approval or adequate controls

required under existing laws, rules and regulation.
2. Failure to keep bank records within bank premises.
3. Grant of high interest rates, when bank has:
a) negative unimpaired capital or
b) liquid assets to deposit ratio of less than 10% or an operating loss;
4. Non-compliance with PDIC regulations; or
5. Other deposit related practices, activities, and transactions that may be identified through
appropriate issuances

III. Board of Directors

 A. Composition

1) Secretary of Finance – ex officio Chairman of the Board without compensation

2) Governor of the BSP – ex officio member of the Board without compensation
3) President of PDIC – appointed by the President of the Philippines – for a term of 6years –
shall also serve as Vice Chairman of the Board
4) 4 members from the private sector – for 6 years without reappointment by the President of
the Philippines

B. Disqualification of Appointive Members

For the duration of their tenure or term in office and for a period of 1 year thereafter, the
appointive members of the Board shall be disqualified from holding any office, position, or
employment in any insured bank

C. Quorum

i) presence of three (3) members shall constitute a quorum

ii) Secretary of Finance and the Governor of the Bangko Sentral may each designate a
representative
iii) Chairman of the Board – unable to attend – President shall act as Chairman

D. Per Diem

Secretary of Finance shall fix the rate of per diem for every Board meeting.

E. Authority of the Board

1) to issue rules and regulations as it considers necessary for the effective discharge of its
responsibilities
2) to direct the management, operation and administration of PDIC
3) to establish a human resources management system
4) to appoint, establish the rank, fix the remuneration, approve local and foreign training of,
and remove any officer or employee for cause, subject to pertinent civil service laws
5) to adopt an annual budget
6) to approve the methodology for determining the level and amount of provisioning for
insurance and financial assistance losses, which shall establish reasonable levels of deposit
insurance reserves

IV. Officers

1) President
2) Vice President
3) Bank Examiners
4) Claim agents
5) Investigators

V. Deposit Insurance Coverage

 A) Deposit Liabilities

i) The deposit liabilities of any bank or banking institution, which is engaged in

the business of receiving deposits shall be insured with the PDIC
ii) Factors to be considered by the Board:

a. the financial history and condition of the bank

b. the adequacy of its capital structure
c. its future earning prospects
d. the general character of its management
e. the convenience and needs of the community to be served by the bank
and whether or not its corporate powers are consistent with the purposes
of the PDIC Law

iii) The term “deposit” means the unpaid balance of money or its equivalent
received by a bank in the usual course of business and for which it has given
or it’s obliged to give credit to.

B) Statutory Liability of PDIC

PDIC is governed primarily by the provisions of the special law creating it. The liability of the
PDIC for insured deposits therefore is statutory and such liability rests upon the existence of
deposits with the insured bank, not on the negotiability or non-negotiability of the certificates
evidencing these deposits.

VI. Dealings by PDIC Personnel with Banks

A. Designation as Directors and Officers of Banks

Members of the Board and personnel of PDIC may become directors and officers of any bank
and banking institution and of any entity related to such institution in connection with financial
assistance extended by PDIC to such institution and when, in the opinion of the Board, it is
appropriate to make such designation to protect the interest of PDIC.

B. Borrowing from Banks

Borrowing from any bank or banking institution by examiners and other personnel of the
examination departments of PDIC shall be prohibited only with respect to the particular
institution in which they are assigned, or are conducting an examination.

VII. Receivership

A. Appointment

a. appoint PDIC as receiver

b. “receiver” includes a receiver, commission, person or other agency charged by law
with the duty to take charge of the assets and the liabilities of a bank which has been
forbidden from doing business in the Philippines

B. Powers
 a. Control, manage and administer the affairs of the closed bank

i. powers, functions and duties, as well as all allowances,

remunerations and perquisites of the directors, officers, and
stockholders of such bank are suspended
ii. provisions of the Articles of Incorporation and By-Laws of the closed
bank are likewise deemed suspended
iii. assets deemed in custodia legis in the hands of the receiver
iv. from the time the closed bank is placed under such receivership, its
assets shall not be subject to attachment, garnishment, execution,
levy or any other court processes

b. In addition to the powers of a receiver, PDIC is empowered to:

i. bring suit to enforce liabilities to or recoveries of the closed bank

ii. appoint and hire persons or entities of recognized competence in
banking or finance to perform such powers and functions of PDIC as
receiver or liquidator of the closed bank
iii. suspend or terminate the employment of officers and employees of the
closed bank

C. Suits Filed by the PDIC

a. In all cases or actions filed by the PDIC as receiver, payment of all docket and other
court fees shall be deferred until the action is terminated with finality
b. Any such fees shall constitute as a first on any judgment

C. Distribution of Assets

After the payment of all liabilities and claims against the closed bank, PDIC shall pay any
surplus dividends at the legal rate of interest from date of takeover to date of distribution,
to creditors and claimants of the closed bank in accordance with legal priority before
distribution to the shareholders of the closed bank.

VIII. Payments of Insured Deposits

A. Manner of Payment

a. Payment of the insured deposits on such closed banks shall be made by PDIC either

i. by cash, or
ii. by making available to each depositor a transferred deposit in another
insured bank in an amount equal to insured deposit of such depositor

b. “Transfer deposit” means a deposit in an insured bank made available to a depositor

by PDIC as payment of insured deposit of such depositor in a closed bank and
assumed by another insured bank

c. A joint account shall be insured separately from any individually-owned deposit

account
 d. Account held jointly by 2 or more natural persons, or by 2 or more juridical persons
or entities, the maximum insured deposit shall be divided into as many equal shares
as there are individuals, juridical persons or entities, unless a different sharing is
stipulated in the document of deposit

e. Account held by a juridical person or entity jointly with 1 or more natural persons –
the maximum insured deposit shall be presumed to belong entirely to such juridical
person or entity

f. Aggregate of the interests of each co-owner over several joint accounts – shall
likewise be subject to the maximum insured deposit of PhP 500,000

B. Proof of Claims

a. PDIC, in its discretion, may require proof of claims to be filed before paying the
insured deposits.
b. In any case where it is not satisfied as to the viability of a claim for an insured
deposit, it may require the final determination of a court of competent jurisdiction
before paying such claim

C. Settlement Period and Penalties in Case of Failure to Settle

a. Failure to settle the claim, within 6 months from the date of filing of claim, 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

b. Upon the payment of any depositor, PDIC shall be subrogated to the rights of the
depositor against the closed bank to the extent of such payment

c. Such subrogation shall include the right to receive the same dividends from the
proceeds of the assets of such closed bank and recoveries on account of stockholders’
liability as would have been payable to the depositor on a claim for the insured
deposits

D. Notice

a. PDIC shall commence the determination of insured deposits due the depositors of a
closed bank upon its actual takeover of the closed bank, and it shall give notice to the
depositors of the closed bank

b. PDIC shall publish the notice once a week for at least 3 consecutive weeks in a
newspaper of general circulation

E. Discharge

Payment of an insured deposit to any person shall discharge PDIC.

F. Recognition of Owner
 Except as otherwise prescribed by the Board, neither PDIC or 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 under a name other than that of the claimant.

G. Withholding of Payment

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 any liability of such depositor
as a stockholder of the closed bank, or of any liability of such depositor to the closed bank
or its receiver.

H. Prescription

Unless otherwise waived by the PDIC, if the depositor in the closed bank shall fail to claim his
insured deposits within 2 years from actual takeover of the closed bank by the receiver, or
does not enforce his claim within 2 years after the 2-year period to file a claim, all rights of
the depositor with respect to the insured deposit shall be barred.

However, all rights of the depositor against the closed bank and its shareholders or the
receivership estate to which PDIC may have become subrogated, shall thereupon revert to the
depositor. Thereafter, PDIC shall be discharged from any liability on the insured deposit.

IX. Investment By PDIC

A. Money of PDIC not otherwise employed shall be invested in obligations of the Philippines.

a. It shall not sell or purchase any such obligations for its own account and in its own
right and interest, at any one time aggregating in excess of P100,000.00 without the
approval of the Insurance Commissioner

B. The banking or checking accounts of PDIC shall be kept with the Central Bank of the
Philippines, with the Philippine National Bank, or with any other bank designated as depository
or fiscal agent of the Philippine Government.

X. Extension Of Loans

A. If an insured bank is in danger of closing, in order to prevent such closing, PDIC is

authorized to make loans to, or purchase the assets of, or assume liabilities of, or make
deposits in, such insured bank, upon such terms and condition as the Board may prescribe,
when it is essential to provide adequate banking service in the community or maintain
financial stability in the economy

i. extend financial assistance to, assume liabilities of, purchase the assets of an
insured bank if PDIC finds that the resumption of operations of such bank is vital to
the interests of the community, or severe financial climate exists which threatens the
stability of a number of banks possessing significant resources
ii. however, reopening and resumption of operations of the closed bank shall be
subject to the prior approval of the Monetary Board
 B. PDIC may provide any corporation acquiring control of, merging or consolidating with or
acquiring the assets of an insured bank in danger of closing in order to prevent such closing or
of a closed insured bank in order to restore to normal operations

C. Prior to the exercise of these powers, PDIC shall determine that actual payoff and
liquidation thereof will be more expensive than the exercise of its power

D. When the MB has determined that there are systematic consequences of a probable failure
or closure of an insured bank, PDIC may grant financial assistance to such insured bank in
such amount as may be necessary to prevent its failure or closure and/or restore the insured
bank to viable operations

i. 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

ii. 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

E. PDIC may not use these authorities to purchase the voting or common stock of an insured
bank

F. Financial assistance may take the form of equity or quasi-equity of the insured bank as
may be deemed necessary by the Board with concurrence by the MB

XI. Borrowings

A. PDIC is authorized to borrow from the BSP and the BSP is authorized to lend PDIC

B. When the funds of the PDIC are not sufficient to provide for an emergency or urgent need
to attain the purposes of the PDIC law, it 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

XII. Issuance of Bonds

With the approval of the President, PDIC is authorized to issue bonds, debentures, and other
obligations as may be necessary for purposes of settlement of insured deposits in closed banks
as well as for financial assistance

a. The Board shall determine the interest rates, maturity and other requirements of
said obligations
b. PDIC shall provide for appropriate reserves for the redemption or retirement of said
obligation

XIII. Reports and Audit

A. PDIC shall annually make a report of its operations to the Congress as soon as practicable
after the 1st day of January in each year
 B. Its financial transactions shall be audited by the Commission on Audit

XIV. Miscellaneous

A. Signs

a. 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 advertisements to the effect that its
deposits are insured by PDIC

b. Board may exempt from this requirement advertisements which do not relate to
deposits or when it is impractical to include such statement therein

B. Merger or Consolidation of Insured Banks

a. Without prior written consent by PDIC, no insured bank shall:

i. merge or consolidate with any noninsured bank or institution, or convert into

a noninsured bank or institution; or
ii. assume liability to pay any deposits made in, or similar liabilities of, any
noninsured bank or institution; or
iii. transfer assets to any noninsured bank or institution in consideration of the
assumption of liabilities for any portion of the deposits made in such insured
bank

XV. TRO and Injunction

A. No court, except the Court of Appeals, shall issue any temporary restraining order,
preliminary injunction or preliminary mandatory injunction against PDIC
B. The Supreme Court may issue a restraining order or injunction when the matter is of
extreme urgency involving a constitutional issue
C. Any restraining order or injunction issued in violation of the foregoing is void and of no
force and effect and any judge who has issued the same shall suffer the penalty of suspension
of at least 60 days without pay