Bank deposits up by 7%

Deposits placed in the country’s banking system rose in 2012 as growing incomes allowed individuals and enterprises to set aside their excess money liquidity.

Rising deposits were credited for helping boost the total resources of banks, which allowed them to lend more.

Data from the Philippine Deposit Insurance Corp. (PDIC) showed that total deposits in the banking sector reached P5.75 trillion as of the end of 2012, up by 7 percent from P5.37 trillion a year ago.

Of the amount, the bulk of P4.7 trillion was accounted for by peso-denominated deposits while the balance represented the share of placements in foreign currency deposit units (FCDUs) of banks.

Saving deposits accounted for P2.56 trillion and of the P5.75 billion, P2.56 trillion represents savings deposits, while demand deposits amount to P1.337 trillion. Time deposits account for the balance.

The growth in deposits came along the expansion of the economy. Monetary officials said that as the economy grew, people saved more and with the rise in deposits, banks were able to lend more to individuals and businesses, resulting in further expansion of the economy.

Last year, the Philippine economy grew by 6.6 percent year on year, registering one of the fastest growth rates in Asia during the period. It beat the government’s target of 5 to 6 percent.

According to PDIC, rising deposits is a reflection of public confidence in the banking sector.

PDIC officials said that keeping the public’s trust in the banking sector was the primary objective of the state-owned deposit insurer. This is why, according to officials, PDIC has been ensuring the prompt payment of deposit insurance claims in the event of bank closures.

But more important than the prompt servicing of deposit insurance claims, officials said, was the implementation of measures to strengthen the banking sector to prevent closures.

This is the reason PDIC and the Bangko Sentral ng Pilipinas have been implementing an incentives program for mergers. The program is meant to encourage strong banks to acquire weak rural banks so that bank closures can be avoided or reduced.

In 2012, there were 24 banks with a combination of 97 branches that closed, most of which were rural banks. These figures were lower than the 29 closed banks with 125 branches that closed in 2011.

The state-owned insurer paid P3.76 billion in deposit insurance claims last year. This was lower by nearly 70 percent than the P12.36 billion paid in the previous year.