Philippine Deposit Insurance Corp. (PDIC) said on Wednesday that its amended charter, which lapsed into law last June 17, enables the state fund to adjust the maximum deposit insurance coverage (MDIC)—currently at P500,000—based on inflation and other relevant economic indicators without the need for a new law.
These latest amendments to the PDIC charter took effect on Wednesday, after becoming law without the signature of the President, 30 days after Congress presented the bill to Malacañang.
The new law, Republic Act No. 11840, provides enhanced authorities to PDIC to further strengthen and expand the financial safety net for depositors and creditors of Philippine banks.
“Deposit insurance is an important pillar of trust and confidence and it is most effective when it stands alongside other pillars of security to ensure a sound and stable financial system,” PDIC president and chief executive Roberto Tan said in a statement.
“Thus, the new law is a welcome development to reinforce the role of deposit insurance as a financial safety net that helps sustain public confidence in the banking system,” Tan said.
The last time the MDIC increased was in 2009—doubling from P250,000 to P500,000—through an earlier amendment to the PDIC charter.
Still at P500,000 for now
The latest amendment to the charter, however, kept the MDIC at P500,000 while giving the PDIC board the power to adjust the amount.
The law says that the MDIC may be adjusted “in case a condition occurs that threatens the monetary and financial stability of the banking system that may have systemic consequences.” Any change of the MDIC must have the PDIC board’s unanimous vote.
Under the latest version of the PDIC charter, the state firm may now adjust the MDIC based on inflation and other relevant economic indicators without the need for legislation.
Also, the MDIC is up for revisiting every three years and the PDIC board of directors is authorized to increase it, if necessary, with the approval of the President.
Aside from the ability to adjust the MDIC, the law also reclassifies the PDIC as an attached agency of the Bangko Sentral ng Pilipinas (BSP) instead of the Department of Finance.
Further, the PDIC is now mandated to provide insurance cover to Islamic bank products or arrangements classified as deposits by the BSP.
Because of the peculiar characteristics of Islamic banking, the amended charter authorizes the agency to establish a separate deposit insurance fund or “takaful” to cover these types of deposit products.