State deposit insurance firm’s role when a bank goes bankrupt

Persida Acosta

Persida Acosta

Dear PAO,
I maintain several deposit accounts in a rural bank that recently declared bankruptcy. During our meetings with the bank’s officials, they repeatedly assured us that our money is covered by insurance, which will be paid by the PDIC. May I know what this PDIC insurance is?

Dear Penelope,
In order to promote and safeguard the interest of the depositing public, our State enacted Republic Act (RA) 3591, which created the Philippine Deposit Insurance Corporation (PDIC) and provided a mandatory insurance coverage for deposits of money in all banks. This mandatory insurance covers the contingency of bank closure, which will then trigger the obligation of the PDIC to pay the insured deposit.

As used in the law, 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 is obliged to give credit to a commercial, checking, savings, time or thrift account, evidenced by a passbook, certificate of deposit, or other evidence of deposit, together with such other obligations of a bank that are deemed deposit liabilities, excluding those payable at the office of the bank located outside of the Philippines (Sec. 5(g), RA 3591). Other accounts that are not covered by PDIC insurance include investment products such as bonds and securities, trust accounts and other similar instruments, fictitious or fraudulent deposit accounts, deposits emanating from unsafe/unsound banking practice and deposits that are determined to be the proceeds of an unlawful activity. (Ibid.)

As to the amount of insurance coverage, the law states that insured deposit means the amount due to any bona fide depositor for legitimate deposits as of the date of closure but not to exceed Five hundred thousand pesos (P500,000.00). In determining such amount due to any depositor, there shall be added together all deposits in the bank maintained in the same right and capacity for his or her benefit either in his or her own name or in the name of others (Sec. 5(j), Id.). This means that the PDIC insures only the first five hundred thousand pesos due to a depositor. Such maximum amount is shared by all of the depositor’s single deposit accounts in the bank. Thus, PDIC is only obliged to pay a depositor up to five hundred thousand pesos, regardless of whether the depositor has one, two or more single accounts.

Please be informed, however, that joint accounts, regardless of whether the conjunction ‘and’, ‘or’ ‘and/or’ is used, are insured separately from individually-owned deposit accounts. Although in the case of joint accounts, the maximum insured deposit shall be divided into as many equal shares as there are joint owners and the aggregate of the interest of each co-owner over several joint accounts is also subject to the maximum insured deposit of Five hundred thousand pesos (P500,000.00) (Id.). Thus, if a depositor has both single and joint deposit accounts in a bank, the PDIC may be obliged to pay him up to one million pesos: five hundred thousand pesos (P500,000.00) for his single account/s, and another five hundred pesos (P500,000.00) for his joint account/s.

Applying the foregoing to your case, the closure of the rural bank on account of bankruptcy triggered the obligation of the PDIC to pay your insured deposits up to a maximum amount of five hundred thousand pesos (P500,000.00) for your single account/s. If you have a joint account, the same is separately insured with the PDIC, for which you may also be paid up to a maximum amount of five hundred thousand pesos (P500,000.00). The PDIC is mandated to settle the obligation as soon as possible and pay the insured deposit either in cash or in the form of a transferred deposit in another bank.

Again, we find it necessary to mention that this opinion is solely based on the facts you have narrated and our appreciation of the same. The opinion may vary when the facts are changed or elaborated.

We hope that we were able to enlighten you on the matter.

Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to


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