WB boosts PDIC’s capability to assess risks faced by banks

MANILA, Philippines - The World Bank (WB) has turned over to the Philippine Deposit Insurance Corp. (PDIC) the customized financial projection models to enhance the state-run insurer’s analytical capability in assessing banks’ risks.

The WB has tapped experts for the Financial Sector Reform and Strengthening (FIRST) project to develop models on stress testing and failure prediction and bolster the PDIC’s analytical tools to estimate and better manage risks in banks and the banking system.

The projection models are expected to result in better estimation procedures for determining adequacy as well as management of the Deposit Insurance Fund (DIF).

The DIF is the source of insurance payment for depositors and financial assistance to banks.

WB country director Motoo Konishi said the tools are cutting-edge solutions representing frontier knowledge in modeling and forecasting the needs for the deposit insurance, guaranteeing the stability of the Philippine banking system and supporting greater access in finance.

Konishi said he is hopeful the implementation of this project would impact PDIC’s enhanced capability to assess the financial condition of banks.

For his part, PDIC president Valentin A. Araneta said the PDIC is already implementing the stress test simulations.

He added that the customized feature of the models will enable the PDIC to further improve these models to address future developments in the local banking industry.

The joint initiative of the WB and PDIC is aligned with the PDIC’s Roadmap to 2016, specifically the strategic direction to detect bank weaknesses early through surveillance and monitoring.

As co-regulator of the Philippine banking system, the PDIC works closely with the Bangko Sentral ng Pilipinas to monitor the health of banks to ensure depositor protection and financial stability.

FIRST is an international multi-donor grant facility that offers technical assistance to promote financial sector strengthening.