GMA signs law raising deposit insurance to P.5 million

MANILA, Philippines – President Arroyo signed into law yesterday amendments to the Philippine Deposit Insurance Corp. (PDIC) charter that doubles deposit insurance from P250,000 to half a million pesos and grants the agency more powers and financial muscle.

The President signed Republic Act No. 9576 during the Philippine Economic Zone Authority (PEZA) Investors’ Recognition Day at the World Trade Center in Pasay City.

The law is one of the Arroyo administration’s response to the global economic crisis aimed at ensuring confidence in the country’s banking system and reforming the deposit insurance scheme.

The law increases the maximum deposit coverage provided by the PDIC from P250,000 to P500,000.

“The increase is a means to encourage depositors to keep their deposits in banks and protect it in the midst of the present global financial crisis,” a Palace statement said.

The new law also includes important provisions to ensure that the PDIC “remains financially and operationally strong to fulfill its mandate under its charter,” it said.

To strengthen its regulatory and administrative authority, the laws grants the PDIC the authority to determine and prescribe which deposit products are covered by insurance and to exclude those that take undue advantage of the deposit insurance coverage, which the government, through the PDIC, provides.

Excluded products are bonds, trust accounts, securities, fictitious accounts, those emanating from unsound banking practices and proceeds from money laundering, officials said.

The PDIC is also authorized to conduct independent special examination of banks and may even inquire into or examine deposit accounts to minimize or limit the risks to the Deposit Insurance Fund (DIF) borne out of fraudulent creation of deposit liabilities or manipulation of deposit records.

The law also gives directors, officers, employees and agents of the PDIC enhanced legal protection and indemnity from unfounded and malicious prosecution arising from the performance of their duties.

The PDIC as an institution is also given the authority to reorganize as may be necessary to make its organizational structure conform with the new law.