PDIC backs bill amending its charter

MANILA, Philippines -The Philippine Deposit Insurance Corp. gave its support for the recent bill filed in Congress amending the state deposit insurer’s charter.

“The move affirms the important role the state deposit insurer plays as a financial safety net player in the light of legislative reforms in the financial system,” the PDIC said in a statement.

House Bill 4392, a bill amending the Charter of the PDIC, was filed by Batangas Representative Nelson Collantes (3rd district) last May 12.

The PDIC noted this came following key legislative reforms strengthening the financial sector such as the passage of the Insurance Code of the Philippines and the recent proposals filed to amend the Charter of the Bangko Sentral ng Pilipinas.

Cristina Orbeta, PDIC’s executive vice president for receivership and liquidation, said HB 4392 will allow the insurer to better perform its role as a co-regulator of banks.

“Lessons from the financial crisis taught us that a strong resolution and liquidation framework over banks is crucial to depositor protection and to the stability of the banking system,” Orbeta said.

Collantes, in his explanatory note of the bill, said that such will enhance bank resolution and depositor protection.

This will be done through additional options for liquidating shuttered banks such as the creation of bridge banks. Bridge banks act as shell companies that absorb the assets and liabilities of an insolvent bank until the latter is ready for acquisition or liquidation.

By using a bridge bank, the closed bank fetches a fair price in the market once it is bid out to interested investors.

At the same time, PDIC noted that the bill also pushes for the removal of the 90-day receivership period for closed banks as the lenders will be allowed to address their problems while still open.

“The proposed bill also aims to institute various measures to further protect the depositing public by allowing the PDIC to settle claims based on authentic evidence of deposit. This will further expedite settlement of deposit insurance claims,” the state deposit insurer said.

“Stiffer sanctions and penalties for bank fraud and various offenses that adversely affect the bank, its depositors and creditors are being proposed,” the PDIC said.