WB grants loan to boost PDIC’s surveillance system

MANILA, Philippines - An assistance program targeted to prevent bank collapses has been granted by the World Bank to the government, the Philippine Deposit Insurance Corp. (PDIC) said yesterday.

The “financial modelling” project will improve PDIC’s “surveillance and oversight capabilities over member banks and mitigate risks” that could push lenders to close shop, the state deposit insurer said in a statement.

The technical assistance program will be funded by the Financial Sector Reform and Strengthening Initiative (FIRST), a multi-donor grant facility tapped by the World Bank. The amount for the program was not provided.

“The World Bank directly contracted the consultants,” said Auramar Calbario, PDIC communications officer, when asked for the program’s budget. According to the statement, experts from FIRST will begin the program this quarter.

“The World Bank, with the funding from the FIRST, will help develop the PDIC’s bank stress testing methodology to enable PDIC to assess the financial position of banks under various stress scenarios,” the statement said.

In addition, a “bank failure prediction model” will also be formulated for PDIC to assess the adequacy of its resources to meet demand from depositors of shuttered banks. The model will be integrated in PDIC’s system and training will be provided to personnel for its use.

The whole process is expected to be completed this April, PDIC said.

World Bank country director Motoo Konishi, in the same statement, underscored the need for better bank monitoring to ensure the money of depositors are safe.

“Effective deposit insurance is a crucial element in the effort to bring more Filipinos to save safely in the formal financial system where their deposits are protected,” Konishi pointed out.

PDIC serves as the receiver of failed banks that service depositors claims, rehabilitate, and liquidate, if needed, the assets of the banks.