The Senate has unanimously approved on third and final reading the bill raising the maximum deposit insurance coverage from P250,000 to P500,000.
The increase was made as an amendment to the Philippine Deposit Insurance Corp. charter. The proposed measure, approved by 13 senators present at the session, is intended to provide confidence and stability in the local banking sector amid the global financial crisis.
“These are extremely confusing times where panic can only make matters worse. Maintaining, if not restoring confidence in the banking system should be our priority. A stable and dependable deposit insurance system shores up depositor confidence. It also guarantees the sufficiency of credit to finance vital economic activities in the country,” Sen. Edgardo Angara, chairman of the Senate committee on finance, said.
“This can be done by instituting protective or remedial measures to ensure that the Philippine financial market is resilient enough to weather the crisis. Financial reform in the PDIC is very timely since it aims to safeguard the interest of the depositing public,” he added.
At the proposed level of maximum deposit insurance coverage (MDIC), about 97.23 percent of the more than 31 million deposit accounts in the country will enjoy the benefits of deposit insurance cover.
“The increase will encourage depositors to keep their money in the banks, knowing that their savings would be safe, intact, and readily available on the faith and credit of the government,” Angara said.
Other countries have also adopted similar measures to alleviate the effects of the financial turmoil in their respective banking systems.
In Europe, the governments of Sweden, Spain, Belgium and The Netherlands have agreed to raise deposit guarantees from 20,000 euro to 100,000 euro. Meanwhile, governments of Ireland, Germany, France, Denmark and Austria have provided blanket guarantee of bank deposits. The United Kingdom has likewise also the guarantee to its depositors from £35,000 to £50,000.
In the US, The Federal Deposit Insurance Corp. (FDIC) has increased its deposit insurance coverage from $100,000 to $250,000 effective until 2009.
In Asia, neighboring countries such as Hong Kong, Malaysia and Singapore have announced sovereign guarantee of all local and foreign currency deposits until the end of 2010. Indonesia recently extended its coverage from the equivalent of $9,000 to $182,000, while Kazakhstan’s coverage was adjusted from the equivalent of $6,000 to $42,000.
“We are facing extraordinary challenges. Internationally, governments have responded by prioritizing measures to restore stability to their respective economies. While nobody can accurately predict what the longer-term consequences of this crisis will be, the emerging truth requires us to prepare now for the inevitable impact to the Philippines,” Angara said.
He said the passage of the amended PDIC charter in the Senate was one bold move to place the country in a better position to be able to absorb the shock from the credit crisis and financial turbulence.