MANILA, Philippines – The government will implement a P85-billion “financial strengthening package” to brace Philippine financial and banking system from the global economic crisis, officials said yesterday.
President Arroyo’s economic adviser and Albay Gov. Joey Salceda and Budget Secretary Rolando Andaya Jr., said in separate interviews that the package mainly entails infusion of capital to the Bangko Sentral ng Pilipinas (BSP) and the Philippine Deposit Insurance Corp. (PDIC) plus other reform measures to strengthen the country’s financial system.
PDIC president Jose Nograles said the corporation is asking the national government to infuse some P45 billion as equity to cover moves from the Palace and Congress to increase deposit insurance from P250,000 to P1 million in an effort to strengthen public confidence in the banking system.
Mrs. Arroyo on Tuesday announced that she will certify as urgent a bill to increase the deposit insurance to P1 million.
“You know actions undertaken are preemptive and proportionate response to the situation,” Nograles told a news briefing at the Palace. “The figure of P1 million is proportionate considering other countries instituted blanket coverage figure.”
He said P1 million will cover 99.8 percent of all rural accounts and “covering small depositors, already will cover 98.5 percent of accounts of our banking system.”
He said there are about 32 million deposit accounts.
Nograles, however, clarified that the national government will put up an initial P3 billion with the rest to be funded in future appropriations through a multi-year obligation authority (MYOA).
“As the President said, it’s better to have it when you don’t need it than need it when you don’t have it. This will give us quick response mechanism in case we need to shore up our insurance reserve,” he said.
In the same briefing, Finance Secretary Margarito Teves pointed out that other countries have “generous, forceful and decisive insurance coverage or without limitations.”
Andaya and Salceda said the government will infuse P40 billion into the BSP to improve its capacity to assist banks and other financial institutions that may be imperiled in case the global financial crisis worsens.
Andaya said the MYOA would be for 10 years but the BSP can quickly receive the amount when it securitizes or “sells” the infusion.