The country’s deposit insurance fund (DIF) grew in the first quarter due to the income the Philippine Deposit Insurance Corp. generated from its portfolio investments.
Whenever government regulators decide to close a bank, PDIC sources the money it uses to pay for deposit claims from the insurance fund.
Ana Carmel Villegas, PDIC senior vice president for management services, told reporters that the DIF as of the end of March stood at P91.5 billion, up by 24 percent from the P73.9 billion posted in the same period last year.
Also, the latest amount was up by 9 percent from the P84.2 billion reported at the close of 2012.
According to Villegas, the latest DIF was equivalent to 5.7 percent of the total insured bank deposits in the country, exceeding the official target of 5 percent, which is also the international benchmark for adequacy.
The ratio of the DIF to insured deposits stood at 4.7 percent as of March last year, and 5.3 percent as of December 2012.
“The increase in the DIF was driven by the insurance premiums we collected from member-banks and from the investments we earned from investments,” PDIC president Valentin Araneta said. “The DIF is being managed by our treasury group and money is invested largely in government securities.”
The latest DIF is a result of the liabilities shouldered by PDIC in the first quarter.
During the period, PDIC reported, six banks were ordered closed by the Monetary Board of the Bangko Sentral ng Pilipinas.
The six banks had P520.81 billion in insured deposits. PDIC is required to settle the claims.
Villegas also said that the World Bank has been providing PDIC with technical assistance to help improve its financial models. The technical help will allow PDIC to incorporate “negative carry” in the computation of the ratio of the DIF to estimated deposits.
Negative carry refers to the income-opportunity loss arising from PDIC’s move to extend loans to distressed banks rather than invest the same money in portfolio instruments where it earns interest.