State-run Philippine Deposit Insurance Corp. (PDIC) is backing the Congressional initiative to amend its Charter so that it might introduce, among other things, bridge banking while liquidating a closed bank, and generally enable the deposit insurer to conform to international standards.
In a statement over the weekend, the deposit insurer said it welcomes the filing of the House of Representatives the House Bill (HB) 4392 or the bill amending the Charter of the PDIC on May 12.
According to the explanatory note of the bill, the amendments aim to institute much needed reforms to the PDIC Charter as it seeks to enhance bank resolution and depositor protection by establishing a framework that will address gaps and allow the Philippines to conform to international standards.
The enhanced resolution framework shall provide PDIC with more options to tackle problem banks. It will also maximize recovery for depositors and other creditors, and allow prompt settlement of their claims.
The bill also proposes measures to introduce additional modes of liquidating a closed bank such as bridge banking, to enhance PDIC’s authority as liquidator of closed banks.
Under bridge banking, a bank is authorized to hold the assets and liabilities of another bank, specifically an insolvent bank. A bridge bank is charged with continuing the operations of the insolvent bank until the bank becomes solvent through acquisition by another entity or through liquidation.
“A more efficient and prompt resolution process shall help minimize the negative impact of bank closures on the stability of the banking industry,” said House Committee on Banks and Financial Intermediaries Chairman Nelson Collantes, author of the bill.
Adhering to the principle that bank rehabilitation should happen while the bank is still open, the bill also pushes for the removal of the 90-day receivership period for closed banks. Instead, banks will be given opportunities to address their problems while still open.
The bill also covers changes to the liquidation process in the event bank closure becomes inevitable. It also aims to institute various measures to further protect the depositing public by allowing the PDIC to settle claims based on authentic evidence of deposit.