DEPOSITINSURANCE

PHILIPPINE DEPOSIT INSURANCE CORPORATION

R.A. 3591

I. Role of PDIC

a) Insure the deposits of all banks (only those entitled)

b) Promote and safe guard the interest of the depositing public

II. POWERS OF PDIC AS A CORPORATE BODY

1) To adopt and use a corporate seal2) To have succession until dissolved by an Act of

Congress3) To make contracts4) To sue and be sued, complain and defend, in

any court in the Philippines5) To appoint by its Board of Directors such officer

and employees not otherwise provided for by law

6. To prescribe, by its BoD, by-laws not inconsistent with law

7. To exercise all powers specifically granted by law and those incidental and necessary thereto

8. To conduct examination of banks with prior approval of the Monetary Board

9. To act as receiver10. To prescribe such rules and regulation to carry out

the provision of the PDIC law11. To establish its own provident fund12. To compromise condone or release any claim or

settled liability to PDIC

III. Board of DirectorsA. Composition

a) Secretary of Finance (Ex-officio Chairman)b) Governor of BSP (Ex-officio member)c) President of PDIC (Vice-Chairman)d) 2 members from the private sector

Qualification of the 2 appointive members:1. good moral char.2. unquestionable integrity and responsibility3. recognized competence in economics, banking, law, management administration or insurance4. at least 35 yrs. of age

B. Disqualification – from holding any office, position or employment in any insured banks

C. Quorum1) The presence of 3 members shall consists a

quorum. All decisions of the BoD shall require the concurrence of at least 3 members.

2) The Sec. of Finance and the Gov. of BSP may designate their respective representative. (must not be lower than Undersecretary or Deputy Gov.)

3) In the absence of the Chairman or there is vacancy in the office of the Sec. of Finance, the President shall act as chairman.

D. Per Diem The Sec. of Finance shall fix the rate of

per diem for every Board Meeting attended by the members from the private sector.

The President may fix emoluments of the members comparable to other BoD of Government financila institution

E. Authority of the Board1. Prepare and issue rules and regulation as it

considers necessary for the effective discharge of its responsibilities;

2. Direct the management, operation and administration of PDIC;

3. Establish human resource management system which shall govern the selection, hiring, appointment, transfer, promotion or dismissal of all personnel;

4. To appoint, establish the rank, fix renumeration, approve local and foreign training and remove any officer or employee for cause subject to pertinent civil service laws

5. Adopt annual budget for, and authorize such expenditure as are in the interes of the effective administration and operation of PDIC;6. Approve the methodology for determining the level and amount of provisioning for insurance and financila assistance losses, which shall establish reasonable levels of deposit insurance reserves.

IV. OFFICERSA. The President

1) The chief executive2) Salary shall be fixed by the President of the Phil.3) Sum total of the salary and other emoluments shall

be the ceiling for fixing the salary, allowances and other emoluments of other personnel.

Powers and Duties:a) To prepare the agenda for the meeting of the BOD

and to submit policies and measure w/c he believes necessary to carry out the purpose of the PDIC law;

b) To execute and administer the policies and measures approved by the Board;

c. To direct and supervise the operations and internal administration in accordance with the policies and measures;

d. Represent the PDIC in dealings with other agencies;e. To authorize contract, notes and securities issued

and the annual reports and financial statements;f. To represent the PDIC either personally or through

counsel, in legal proceedings;g. To delegate his powers to represent to other

officers; andh. To exercise such other powers as may be vested in

him by the Board.

B. The Vice-President-Salary shall be fixed by the Board upon recommendation by the President- During absence or temporary

incapacity of the President, or in case vacancy or permanent incapacity, pending appointment of a new President; the Vice-President shall act as President.

C. Bank Examiners- appointed by the BOD- have power to throrough examination of all the affairs of the bank and shall have the power to:

1. Administer oaths2. Examine and take and preserve the testimony of any

of the officer and agents thereof, and3. Compel presentation of book, documents, papers or

records necessary to his judgment to ascertain the facts relative to the condition of the bank

D. Claims Agents-appointed by the BoD and have the power to

investigate and examine all claims for insured deposits and transferred deposits.

- have the power to administer oaths and examine under oath and take and preserve testimony of any person relating to such claim.

E. Investigators- appointed by the BoD and have the power to

conduct investigations on fraud, irregularities and anomalies committed in banks, based on reports of examination conducted by the PDIC and BSP or complaints from depositors and other governmental agencies

-also have the power to administer oaths and preserve testimony

V. DEPOSIT INSURANCE COVERAGEA. DEPOSIT LIABILITIES

I. Deposit liabilities of any banks or banking institution w/c is engaged in the business of receiving deposits shall be insured w/ PDIC.

II. Factors to be considered by the BoD:a) The financial history and condition of bank;b) The adequacy of its capital strucutre;c) Its future earning prospect;d) The general character of managemente) Convenience and the nee of the community to be served by

the bank and whether its corporate power is consistent with PDIC purpuse

III. The term “deposit” means the unpaid balance of money or its equivalent received by a bank in the usual course of buiness and for which it has given or its obliged to give a credit to a respective kind of account.

IV. Any obligation of a bank which is payable at the office of the bank located outside of the Phil. shall not be a deposit for any of the purposes of the PDIC law; or included as total of insured deposits.

B. Statutory liability of PDIC

PDIC was created by law (RA 3591), thus will be primarily be governed by the provision of said law, therefore liability of the PDIC is statutory;

Such liability rest upon the existence of deposits and not on the negotiability or no-negotiability of the certificates evidencing the deposits.

Case:PDIC vs. CA (GR No. 118317) citing Fourth Nat. Bank of Wichita vs. Wilson:• Thus, the plaintiffs in Fourth Nat. Bank of Wichita v. Wilson argued that:• x x x the court should hold the certificates to be guaranteed because they are

negotiable instruments, and were acquired by the present holders in due course; otherwise it is said certificates of deposit will be deprived of the quality of commercial paper. Certificates of deposit have been regarded as the highest form of collateral. They are of wide currency in the banking and business worlds, and are particularly useful to persons of small means, because they bear interest, and may be readily cashed; therefore to deprive them of the benefit of the guaranty fund would be a calamity. x x x

• The Supreme Court of Kansas, however, found the plaintiffs’ contention to be without merit, ruling thus:

• x x x The argument confuses negotiability of commercial paper with statutory guaranty of deposits. The guaranty is something extrinsic to all forms of evidence of bank obligation; and negotiability of instruments has no dependence on existence or nonexistence of the guaranty.

• x x x Whatever the status of the plaintiffs may be as holders in due course under the Negotiable Instruments Law, they cannot be assignees of a deposit which was not made, and cannot be entitled to the benefit of a guaranty which did not come into existence. x x x

C. A Deposit must in Fact be Made

i. The fact that the certificate states that the certificates are insured by PDIC does not ipso facto makes the latter liable for the same should the contingency insured against arise. A deposit should actually be made with the bank. The banks have nothing to do with the guaranty fund.

ii. In order that a claim with the PDIC may prosper, the law requires that a corresponding deposit be placed in an insured bank (RA 3591, Sec. 1 and Sec. 10(C))

III. A deposit may be constituted only if money or the equivalent of money is received by a bank (RA 3591 Sec.3(f))

D. Holder in Due Course not Applicable

• Even if depositor be regarded as an innocent purchaser of certificates of deposits as negotiable instrument, still does not relate ot a claim against the guaranty fund.

• The fund protect deposits only.

PDIC vs. CA (GR No. 118317) citing American State Bank vs. Foster

E. Liability Under the Negotiable Instrument vs. The Guaranty Fund

• Liability of the maker of a negotiable instrument should be distinguished from the liability of guaranty fund.

• The circumstances under each kind of liability is entirely apart from both law governing each, respectively.

• Liability of the maker of negotiable instrument is governed by the Negotiable Instrument Law while liability of the guaranty fund is purely statutory

F. Deposit Insurance of Foreign Currency Deposits

Foreign currency deposits are insured with PDIC.

Insurance payment shall be in the same currency in which the insured deposits are denominated. (Sec. 9 of RA 6426Foreign Currency Deposit Act)

G. Duty to Indicate Insurance on Deposits

• All banks shall indicate the coverage of the PDIC in each passbook, certificate of time deposit and/or cover of checkbook for demand deposit/NOW account stating among other thins the maximum amount of insurance

VI. ASSESSMENTA. Assessment Rate– Shall be determined by the Board of DirectorsNote:1. The assessment rate shall not exceed 1/5 of 1%

per annum. Semi-annual assessment = ½ of the assessment rate *assessment base; but in no case shall the amount be less than P250.00.- The assessment base shall be the amount of the liability of the bank deposits w/out any deduction for indebtedness of depositor

2. The semi-annual assessment base for one semi-annual period shall be the average of the assessment base of the banks as of the close of business on March 31 and June 30 or for other semi-annual period of Sept. 30 and Dec. 31