We already knew as early as July that the Marcos administration was siphoning a significant amount of the funds of the Philippine Deposit Insurance Corp. (PDIC), along with so-called idle funds from the Philippine Health Insurance Corp.
PDIC is our state deposit insurer. It was established to promote and safeguard the interests of the depositing public by providing insurance coverage on all insured deposits. PDIC provides a maximum deposit insurance coverage of P500,000 per depositor per bank.
This insurance is set aside in case – knock on wood – a bank suddenly collapses.
PDIC builds up its Deposit Insurance Fund primarily through assessments of banks at an annual flat rate of one-fifth of one percent of their total deposit liabilities.
The good news is that our banking system – thanks to the hard work of our regulators over the past years – has significantly strengthened and remains sound.
Gone are the days when fears of bank runs kept Filipino depositors and banking regulators sleepless at night.
Perhaps this is the reason why the Marcos administration had no qualms about touching the funds meant for the insurance of our hard-earned money kept in banks.
Finance Secretary Ralph Recto has said that such moves are legal, as affirmed by a legal opinion from the Office of the Government Corporate Counsel.
In any case, it’s as good a time as any to look at the numbers, which I’ve had the chance to study in recent days.
Here’s what I gathered:
PDIC has P310.08 billion in its Deposit Insurance Fund as of the end of 2023. Out of this amount, the Marcos administration is reallocating P107.23 billion supposedly to fund other projects that would help the economy grow.
Now, with P107.23 billion less, the Deposit Insurance Fund is down to P202.85 billion. This is against Estimated Insured Deposits amounting to P3.5 trillion.
Nevertheless, at this level, the Deposit Insurance Fund is still adequate, based on the target set by the PDIC Board.
The PDIC Board, as a measure of capital adequacy, has set a target range ratio level of 5.5 percent to eight percent of Deposit Insurance Fund to Estimated Insured Deposits.
“The target represents the ability of the Corporation to cover both anticipated and unanticipated risks in the banking system and to promptly respond to possible insurance calls and financial assistance to banks, as may be warranted. A report on Risk Classification of Banks is presented quarterly to the Board in order to determine the number of banks considered at risk and their corresponding risk exposure, represented by the banks’ estimated insured deposits,” the PDIC said.
As of Dec. 31, 2023, the ratio stood at 8.83 percent, which was above the high end of the 5.5 percent to eight percent target range set by the PDIC board.
This is comforting to know.
However, it’s not a reason to reallocate the funds that’s supposedly for our deposit insurance. And while the government has ruled that the move is legal, the question begs to be asked – is it moral?
Besides, what if we suddenly find ourselves in a crisis?
A crisis doesn’t even have to come from within but it may come from other countries like, say, a repeat of the 1997 Asian Financial Crisis or the 2008 Global Financial Crisis.
Or what if – knock on wood again – another bank collapses, as what happened with Banco Filipino, which was once considered the premier banking institution in the country?
At the time of its closure for the second time in 2011, Banco Filipino had 177,652 depositors with total deposits of P15 billion.
Like a thief in the night
While we are fortunate to have stronger and bigger banks today and stricter and more vigilant regulators, history has taught us that a crisis can come like a thief in the night, catching us by surprise, just as COVID-19 did.
All it takes to trigger a systemic problem is for a highly leveraged company or a conglomerate to default on its loans to banks.
Are we prepared in case a global or domestic crisis erupts and affects our banking system?
Insurance is supposed to mitigate risks. It’s meant to protect us during unforeseen situations.
For example, we avail ourselves of car insurance in case we meet an accident on the road or in case of “Acts of God” such as heavy flooding or earthquakes. Or we obtain fire insurance for our homes and offices in case our properties suddenly and unexpectedly burn down.
This is the whole point of insurance, which is why we spend hard-earned money for it. Touching funds that are supposedly meant for insurance defeats their purpose and intention.
And yet, our leaders have no qualms siphoning funds meant to insure our bank deposits, just as they dipped their hands in the funds of PhilHealth and cut the budget meant for Filipinos’ education and social services.
Now, I can’t help but wonder, can we, as citizens, also get insurance for our corrupted funds? Ah, that would be the day.
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Email: eyesgonzales@gmail.com. Follow her on Twitter @eyesgonzales. Column archives at EyesWideOpen on FB.