PDIC has enough resources for deposit claims

MANILA, Philippines - State-run Philippine Deposit Insurance Corp. (PDIC) said the country’s banking system continued to strengthen as bank closures over the years have weeded out weak banks.

PDIC said in a statement that the government has the resources through the Deposit Insurance Fund (DIF) to settle deposit claims of weak banks that were ordered closed by the Bangko Sentral ng Pilipinas (BSP).

“A stronger banking system will in turn pose lesser risks to the depositing public and the DIF. This also reflects the fund’s stability and capacity to meet the risks in the system,” the government agency said.

Latest data from the BSP showed that the number of banking institutions fell to 726 as of end-December last year from 758 as of end-December 2010 with the shutdown of weaker players in the banking industry.

By banking classification, the number of head offices universal and commercial banks reached 38 followed by thrift banks with 71 thrift banks, and rural banks with 617.

The list of banks ordered closed by the BSP was led by the Aguirre-controlled Banco Filipino Savings and Mortgage Bank and LBC Development Bank of the Araneta clan.

Despite the payouts made for the insured deposits of 31 closed banks last year, PDIC said the DIF climbed 11.9 percent to P72.62 billion as of end-February this year from P64.91 billion as of end-February last year.

The DIF serves as the funds backing up the insured deposits of the banking system. It is invested in Philippine government securities and government guaranteed instruments prescribed in the Charter.

To further strengthen the fund, the PDIC obtained a technical assistance grant called the “Enhancement of Insurance Reserves Targeting (IRT) Framework”, under the Financial Sector Reform and Strengthening (FIRST) Initiative Project.

First Initiative administered by the World Bank is a multi-donor grant facility providing technical assistance to promote financial sector strengthening.

The PDIC also minimizes risks by exercising vigilance in the onsite and offsite monitoring of the financial condition of member banks.

PDIC has issued several Regulatory Issuances (RIs) to implement the authorities granted to it under the new Charter to examine banks and investigate them if there are reports of unsafe and unsound practices.

The total resources of the banking system rose by 5.7 percent to P7.6 trillion as of end-December last year due to the growth in currency and deposits, indicative of the public’s continued trust in the banking sector.

Total peso and foreign-currency denominated deposits in banks climbed 4.9 percent to P5.37 trillion last year from P5.12 trillion in 2010 as more Filipinos continued to save in the formal banking sector.