Rural banks back bill expanding PDIC functions

Cebu City – Rural bankers nationwide have expressed their support for the passage of a bill increasing the maximum deposit insurance coverage.

The 600-strong Rural Bankers Association of the Philippines (RBAP) passed a resolution last week supporting a proposed law that would expand the regulatory functions of the Philippine Deposit and Insurance Corp. (PDIC), as well as increase the maximum deposit insurance cover from P100,000 to P250,000.

The resolution, signed during RBAP’s national convention here, supported a congressional bill that seeks to implement amendments to Republic Act 7400 or the 1992 charter of the PDIC. The proposed law has already passed the bicameral committee but still has to be ratified by the House of Representatives.

When ratified, it will be forwarded to the Office of the President for signing into law.

Foremost concern in the proposed amendments is the increase in deposit insurance cover to P250,000 from the present P100,000.

Based on PDIC data, total insured deposits in the system stands at P717 billion, compared to P462 billion at the present P100,000 deposit cover.

As of end-December, total deposits are slightly above P2 trillion consisting of 26 million deposit accounts.

PDIC president and chief executive officer Ricardo M. Tan said that the proposed increase would restore the extent of protection at the 1992 level. That means the P250,000 maximum deposit insurance cover would be equivalent to roughly P124,291, or its equivalent US dollar value of $4,440, higher than the $3,920 in 1992.

The PDIC originally wanted to increase to P300,000 the cover. However, that amount would require a huge amount of reserves on its part while a reduction to P250,000 was deemed as manageable.

The proposed legislation will not alter the present assessment rate of one-fifth of one percent required by law on the banking system.

Meanwhile, another key provision in the proposed amendment is the expanded regulatory function of the PDIC.

The Bangko Sentral ng Pilipinas (BSP) presently is the only regulator of the country’s banking system, and that includes looking into the entire operations and financial soundness. The PDIC is only allowed to enter the picture when a bank requires receivership and liquidation.

Rural bankers call it as the "embalmer of the banking system wanting to be the physician."

The proposed changes entails monitoring of the financial health of banks, sharing relevant data with of the regulators, and coordinating "corrective action and failure resolution."

The PDIC proposes through the amendments to directly examine banks "provided that no examination has been conducted by the BSP in the past 12 months." It will likewise seek the approval of the Monetary Board, the highest governing body of the BSP, under extreme circumstances.

Tan said that upon the passage of the law, the BSP and the PDIC will formulate guidelines and common parameters for examinations.

"We could work together during actual examinations, or we could divide the banking system either geographically, by sectors like the rural banks, or whatever we will see fit to regulate and assist the system," he added.

Meanwhile, RBAP president Daniel R. Arcenas pointed out that its members numbering over 800 spread out nationwide will now persuade their respective representatives in Congress to ensure the ratification of the proposed law by May.

Rural banks are spread in almost 95 percent of all cities and more than half of the municipalities nationwide.