State-run Philippine Deposit Insurance Corp. (PDIC) expects outgoing President Benigno Aquino 3rd to sign into law the amendments to its Charter before stepping down from the presidency at 12 noon on June 30.
“A bill to further protect the 50-million strong depositing public is expected to be passed into law soon,” the insurer said in a statement on Monday.
Senate Bill 2976, amending Republic Act 3591, as amended, or the PDIC Charter, is now awaiting President Aquino’s approval.
It was passed by the Senate in December 2015 and adopted by the House of Representatives as an amendment to House Bill 6020 in January 2016.
SB 2976 aims to equip PDIC with enhanced authority to implement measures that further improve depositor protection and promote financial stability.
The bill is authored by Senator Sergio Osmeña 3rd, Chairman of the Senate Committee on Banks, Financial Institutions, and Currencies.
Its counterpart bill in the House of Representatives was authored by Representative Nelson Collantes, Chairman of the Committee on Banks and Financial Intermediaries.
The measure provides for the settlement of deposit insurance claims based not only on the closed bank’s records but also on the depositor’s evidence of deposit.
“Depositors with uninsured deposits will also benefit from the bill as it elevates the status of uninsured deposits from an ordinary credit to ordinary preferred credit which will improve their chances of recovering their hard-earned uninsured deposits in closed banks,” the PDIC said.
The proposed amendments also intended to minimize disruption in the financial system and promote financial inclusion by providing depositors with continued access to banking services, it added.
The bill highlights reform measures in bank resolution and liquidation, immediate access to deposit insurance claims, elevation of status of uninsured deposits to ordinary preferred credit, and enhanced governance and institutional framework for the insurer.
With a stronger authority to resolve issues, the PDIC would be able to play a more proactive role in resolving problem banks while still open and so preserve the bank’s franchise value and minimize disruption in the banking system.
The new bank liquidation framework will remove the 90-day receivership period, ensuring a seamless transition from bank closure to liquidation and hasten the disposal of assets to settle a bank’s obligations to creditors.
The framework also adopts other liquidation tools such as the purchase of assets and liabilities to help prevent the dissipation of the value of closed banks’ assets and enhance the chances of recovery on part of creditors and depositors regarding their claims.
The PDIC said it will have greater independence and stronger organizational structure, because of the measure.
It will have expanded investment and fund management options to protect and build up the Deposit Insurance Fund, the source for paying deposit insurance and assistance to distressed banks.
“With enhanced governance and institutional framework, PDIC will be able to respond more quickly to the changing financial landscape and align its services with international best practices in deposit insurance,” the PDIC said.
The bill went through consultations with stakeholders and was supported by the Department of Finance, the Bangko Sentral ng Pilipinas, the Securities and Exchange Commission, and the Governance Commission for GOCCs.
It is also supported by the Bankers Association of the Philippines, the Chamber of Thrift Banks, and the Rural Bankers Association of the Philippines.