Bill to hike bank deposit insurance to P1 million backed

MANILA, Philippines — Local banks are supporting proposals to double the maximum deposit covered by insurance to P1 million per depositor but opposing plans to hike assessments to build up the deposit insurance fund (DIF) of the state-run Philippine Deposit Insurance Corp. (PDIC).

The Bankers Association of the Philippines (BAP), Chamber of Thrift Banks (CTB) and Rural Bankers Association of the Philippines (RBAP) are supporting Senate Bills 1260 and 2089 to amend Republic Act 3591 or the PDIC Charter.

BAP president Jose Arnulfo Veloso told members of the Senate committee on banks, financial institutions and currencies the association is supporting the proposed bills particularly the hike in deposit insurance coverage to P1 million.

When indexed to inflation, Veloso said BAP believes the maximum deposit insurance coverage should be raised to P675,000.

“Although we note that at P500,000, the deposit balances of approximately 97 percent of all bank depositors are already fully insured and that many depositors maintain deposit accounts with more than one bank,” Veloso said.

Veloso, who is also president and chief executive officer of Philippine National Bank, said the plan would benefit most credit-worthy banks through lower insurance cost, but may raise the insurance cost of less credit-worthy banks.

PDIC president Robert Tan said the state deposit insurer builds up the deposit insurance fund primarily through assessments of banks at an annual flat rate of 1/5 of one percent of their total deposit liabilities to pay claims on insured deposits.

Bangko Sentral ng Pilipinas Governor Benjamin Diokno said the proposal to double the maximum deposit covered by insurance to P1 million per depositor would entail an increase in assessments to 2/5 of one percent of total deposits.

“When we increase the insurance, there has to be a corresponding adjustment in the premium,” Diokno said.

Based on inflation indicators, the BSP chief pointed out the current maximum deposit covered by insurance at P500,000 is not appropriate at this time amid the impact of COVID-19 pandemic.